According to Preqin’s Fund Manager Profiles database, Germany has the largest number of private equity fund managers in Western Europe after the UK, with 277 firms active in the country. This blog looks at the investment preferences of these fund managers, including the strategies, industries and geographies considered for investment.
Preferred Investment Strategies
Venture capital is the most widely utilized investment strategy of Germany-based fund managers, with 61% of managers employing this strategy. However, venture capital funds have amassed just 10% of the aggregate €43.7bn that has been accumulated by Germany-based private equity vehicles over the last decade. Finance in Motion is the largest Germany-based manager investing in venture capital by total funds raised in the last 10 years; they invest in a variety of transaction types including growth investments, distressed debt, hybrid and mezzanine investments on a global scale.
Firms that include buyout as part of a wider investment strategy make up only 30% of GPs based in Germany. Buyout funds raised by these managers have accumulated €9.7bn over the last decade, €2.4bn less than real estate vehicles. The largest buyout firm by cumulative capital raised over the past 10 years is Deutsche Beteiligungs, which invests in a variety of transaction types, focusing primarily on buyout investments within Germany. Growth and distressed private equity are the next most prominent firm strategies for Germany-based private equity firms, with 105 firms including growth in their investment strategy and 30 firms investing in distressed private equity, including special situations, distressed debt and turnarounds. Funds following these strategies raised by Germany-based managers have accumulated €2.1bn and €1.3bn respectively over the past 10 years.
At present, there are no Germany-based fund managers dedicated to the timber or natural resources sectors, and no funds of these types have been raised in the past five years. Additionally, only five funds raised by Germany-based managers have had a focus within the energy and utilities sector in the past five years. However, similar to North America and Europe, healthcare is a common industry focus for firms, with 108 Germany-based firms including this as part of a wider industry outlook. Within the past five years, Germany-based managers have raised 17 funds seeking healthcare opportunities, raising a combined €1.8bn.
The majority of Germany-based fund managers prefer to invest on a more local basis rather than a global scale. Of the 277 Germany-based GPs tracked by Preqin, 214 solely target opportunities in Europe, often with a more specific focus on Western Europe. Within this set, 78 firms target opportunities solely within Germany. This preference for local investment should perpetuate the popularity of private equity investing in Germany. Germany-based managers also have a strong fundraising outlook, with 43 funds currently in market targeting an aggregate €9.2bn.