Austrian pensions to invest in PE

A change in Austrian pension fund legislation is set to boost the Austrian private equity market.

The Austrian government has passed a new law allowing Austrian pension and insurance funds to invest up to five per cent of their assets in alternative asset classes, including private equity.

The liberalisation of pension fund investment is part of the Austrian government’s aim to reform capital markets in Austria, said Thomas Jud, managing director of the Austrian Venture Capital Association, AVCO.

He added that it will take time for the Austrian private equity market to see the benefit of the reforms, as pension funds in Austria do not have the experience of investing in that form

of asset class. “Austrian pension funds have a long way to go as they are not yet fully funded. There will be a switch from the current pay-as-you-go structure to a more fully-funded base

of funds in Austria, but this will take time,” he said.

Traditionally, Austrian companies have been more confident with principal loan financing rather than raising equity capital through strategic partners. For this reason, the Austrian private equity market is still in a phase of growth, says Jud. Last year total funds raised reached e234.6 million, compared to e183 million the previous year, according to the European Venture Capital Association. Total investments in 2000 reached e163.1 in 151 deals, compared to e89.3 million in 91 transactions the previous year.

The most significant deal so far in Austria this year is probably Vienna-based Kiwwi CEE Holding AG, says Jud. The company completed a second round of financing in early April totaling e41 million. Kiwwi’s primary focus is offering voice telephony services over Internet protocol to small to medium sized enterprises (SMEs) in Central and Eastern Europe.

AVCO was set up in April this year and is currently working on its first survey of the Austrian private equity market for 2001, due out in March next year. So far the association has 21 full members and 11 associate members.