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The Rapid Decline of Private Equity Fundraising in the Balkans – October 2014

by Luke Goldsmith

  • 17 Oct 2014
  • PE

The Balkans is a geographical region in Southeast Europe. The countries that make up the Balkans are Albania, Bosnia & Herzegovina, Bulgaria, Croatia, Greece, Macedonia, Kosovo, Montenegro, Romania and Serbia. Following the recent news of an expansion of the European Union (EU) to include more Balkan states in the future, this blog will look at the private equity investment in the region. 

Preqin’s Funds in Market online service shows that the number of funds investing in the Balkans region as part of a wider geographical focus has fallen considerably over the last few years. So far in 2014 there has only been one fund to close, at €50mn, far off the impressive figure of €5.5bn that was raised by 18 funds in 2008 – a record year as seen in the graph below. Since the financial crisis, private equity firms have demonstrated considerable reticence in investing in the region, sticking instead to less risky regions such as Poland and other Central European countries.

Real estate funds were always the most popular fund type when investment in the region, as part of a wider focus, was flourishing. Thirty-eight real estate funds were raised from 2005 to 2009, but since then only two real estate vehicles have been raised. This is because many real estate projects have been abandoned, some even at the halfway stage. 

There are currently 24 funds in market that are looking to invest in the Balkans as part of a wider geographical focus. The largest fund in market is NCH Agribusiness Partners II which invests in a diversified portfolio of agricultural land and related businesses, including farmland and agribusiness assets throughout Eastern Europe and Russia. 

Preqin’s Fund Manager Profiles online service shows that there are 35 private equity firms based in the Balkans with the highest number (16) based in Greece, a further seven each in Croatia and Bulgaria, four in Romania and one in Albania. The largest firm based on aggregate capital raised over the last 10 years is Global Finance which has accumulated €350mn and is currently raising the Global Finance Greek Growth Fund, a growth fund focusing on high quality growth-oriented companies in Greece. 

With the news that EU accession is a long way off, the Balkan states will first need to see investment in the region in order to strengthen their domestic economies and quicken the process of inclusion into the EU. Private equity investment will go a long way to help that, especially if firms such as IFC, EBRD and EIB lead the way.

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