The Central and Eastern European (CEE) region is comprised of 23 countries, including Russia, Poland and Turkey, and typically refers to countries that were formerly Russian states. The area has received a lot of attention in the press recently; Ukraine, as mentioned in a recent Preqin blog, is currently facing a political crisis and experiencing a significant financial downturn, while the Russian market has been hurt by falling oil prices and economic sanctions. The effect of the upheavals on the private equity landscape is not yet clear, but this blog will look to provide a snapshot of the investor community based in CEE.
Preqin’s Investor Intelligence online service currently tracks 143 LPs based in the CEE region, which together manage €1.2tn in assets. A third (34%) of these LPs are currently actively looking to invest in the private equity asset class; these investors have an aggregate €521bn in assets under management. Nine percent of CEE-based LPs are looking to invest in private equity in the longer term and 1% are considering making commitments. The remaining 58% are not seeking any type of private equity exposure.
There is a range of investor types operating in the region, with banking institutions making up the largest proportion (27%). Government agencies make up 20% of the number of active CEE-based LPs, with corporate investors accounting for 10%. In terms of investor location, Russia is the most prominent country, with 16% of CEE-based investors residing there. Russia is followed by Greece, which is home to 12% of active CEE-based investors.
The chart below lists the top five CEE-based investors active in private equity as of June 2015. Russian Venture Company is the largest private equity investor in the region, with RUB 30bn (€524mn) currently allocated to the asset class. The Russian government agency is exclusively targeting venture capital funds over the course of 2015 in order to fulfil its portfolio allocation needs.
With regard to investment preferences, Preqin data shows that institutional investors based in the CEE region largely favour domestic investments: 88% of CEE-based private equity investors specifically target Europe-focused funds. Furthermore, seven out of 10 CEE-based LPs have a particular preference for funds investing within their domestic country, encouraging the growth of local economies as well as staying focused on their circle of knowledge and competence. Venture capital and buyout vehicles are the most favoured of CEE-based investors, with 81% and 36% respectively demonstrating a preference for these strategies.