More than 5,500km separates London and New York, the financial hubs of Europe and North America respectively, but with the ongoing process of economic globalization, the development of modern communication technologies and the increasing sophistication of LPs over the years, the frequency of cross-border investing has increased.
Preqin’s Funds in Market online service indicates that there are currently 34 private equity funds in market managed by North America-based GPs that are focused primarily on investing in Europe; these funds have an aggregate target allocation of $19bn. This compares to 18 predominantly North America-focused vehicles being raised by Europe-based fund managers targeting $5.6bn of capital. Preqin data shows that North America-based private equity firms are currently targeting more capital than their Europe-based counterparts, and this blog will take a closer look at the trends evident in transatlantic fundraising.
The charts above illustrate the number of private equity funds closed in the period 2010-2015 YTD by Europe-based and North America-based GPs. Figs. 1 and 2 show the clear prevalence of certain investment types of both Europe- and North America-based fund managers respectively. The most prevalent fund type raised by North America-based managers focused on investing in Europe is real estate (Fig. 2), whereas Europe-based fund managers most commonly invest via fund of funds vehicles when targeting opportunities in North America (Fig. 1). Europe-based private equity firms, however, have raised the most capital from North-America-focused infrastructure funds, raising $6.4bn from just six funds.
The largest North America-focused infrastructure fund managed by a Europe-based manager in the last five years is Macquarie Infrastructure Partners III. The fund held a final close on its hard cap of $3bn in September 2014 and invests primarily in the US and Canada, with the option to invest in Mexico. The third offering in the series from the London-based asset manager, MIRA, aims to earn direct and indirect income through infrastructure assets and infrastructure-related businesses.
Since 2010, $22bn from 77 funds has been raised by Europe-based GPs to invest in North America, which pales in comparison to the $97bn collected by 94 vehicles targeting European investment raised by North America-based fund managers.
Overall, there is more capital being invested by North America-based firms in Europe than the other way around, with firms in both regions showing notable levels of interest in investing capital via fund of funds vehicles. The relatively high numbers of funds of funds successfully reaching a final close, as shown in Figs. 1 and 2, suggest that there is significant appetite from LPs looking to invest through commingled fund structures and diversify their portfolios.