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Connections Between the US and European Private Equity Markets – May 2014

by Matthew Morris

  • 08 May 2014
  • PE

In recent months there has been continued talk and anticipation surrounding what would be the world’s largest free trade deal. The Trans-Atlantic Trade and Investment Partnership, as mentioned in Barack Obama’s 2013 State of the Union address, would see the creation of a free trade agreement between the US and EU, and in some commentators’ eyes, would produce the biggest free market the world has ever seen. In the private equity realm, these two economic heavyweights make up the vast majority of all fundraising activity, clearly dominating the sphere. The two trade blocs certainly would be ever more interconnected with the introduction of a new trade deal, but what is the private equity connectivity like between them? 

According to Preqin’s Fund Manager Profiles online service there are currently 3,641 US-based private equity firms compared to 1,685 EU-based houses. Over the past 10 years the US-based firms have managed to raise an aggregate of almost $2tn, amassing significantly more than their EU counterparts, who have managed to garner $641bn. Collectively, they comprise 72% of the grand total of active private equity firms and have raised 84% of all funds over the last decade. Preqin’s Fund Manager Profiles online service shows that there are currently 115 US-based firms with an appetite for investing in private equity opportunities in the EU. Conversely, there are 199 firms headquartered in the EU that are looking to put their funds to work in the US. 

According to Preqin’s Funds in Market online service, there are only 13 funds in market currently managed by an EU-based manager with a primary focus on investing within the US. To give some perspective, this is a minor 3% of all EU funds in market. Even if we widen the criteria to those funds in market with at least a partial focus on the US, we still only see fewer than 9% of EU-managed vehicles looking to invest in the US at all. 

When looking at US-based funds with a predominant focus on investing in the EU, a similar story emerges. Out of the 1,055 US-based funds in market, there are only 15 funds with a main target on European opportunities. If we widen the scope again to include those with a partial focus of EU investing, there are only 28 funds in market based in the US.  

The largest EU-based fund in market with some focus of investing within the US is Macquarie Infrastructure Partners III, which is looking to collect a total of $2bn to invest in North America-based infrastructure. The biggest US effort with some form of EU focus comes from Lone Star Fund IX, which hopes to raise a total of $7bn to put towards investments in real estate. 

Despite the connections that would be established between the US and Europe through the Trans-Atlantic Trade and Investment Partnership, the private equity activity of the two regions remains somewhat separate. However, this is likely due to the fact that fund managers typically focus on their domestic regions.

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