Sovereign debt crises, bank bailouts and political discontent have featured heavily in the financial news of the Eurozone in recent years, but Belgium, Luxembourg and the Netherlands have been under considerably less scrutiny.
According to Preqin’s Investor Intelligence online service, there are currently 142 LPs based in the Benelux region, accounting for 2.7% of all LP investors tracked by Preqin globally. Of these investors, 21% are located in Belgium, 11% in Luxembourg and 68% in the Netherlands.
Perhaps unsurprisingly, private sector pension funds account for approximately one third (34%) of all investors in Benelux. This is double the proportion private sector pension funds make up across all Europe-based LPs, which currently stands at 17%. Family offices make up the second highest proportion of LPs in the Benelux region (9%), followed by asset managers and investment companies, which make up 8.5% each, foundations and endowments (3.5%), corporate investors (7%), and public pension funds and banks (both 6%).
Institutional investors in the Benelux region are, on average, close to reaching their target allocations for private equity. The average current allocation to private equity funds is 5.2% of total assets, whereas the average target allocation is 5.6%. This gap could suggest a potential for increased investor activity within the private equity asset class, as LPs alter their allocations accordingly in order to meet their target thresholds. However, a general point to be considered is that since Q4 2012, a growing need for liquidity in the volatile European financial arena as well as proposed regulatory changes has led certain investors to reduce their exposure to the asset class. For comparison, the average actual allocation to private equity in October 2012 was 6.6% with a 6.5% target.
One investor based in the Benelux region known to be active in the private equity space is the Luxembourg-based, European Investment Bank. In Q1 2014 it made a commitment of €50mn to the fourth fund in a series raised by Mid Europa Partners. Through this buyout investment vehicle, the bank will gain exposure to leading Central and Eastern European companies operating in sectors with high barriers to entry.
The Benelux region, although small in terms of geographic area and population, hosts an active array of institutional investors that continue to seek LP interest in private equity funds. However, statistics do demonstrate that the economic uncertainty of recent years in the Eurozone has caused investors to show caution, reduce their private equity allocations and seek alternative exposure to more liquid products.