European fund raising down in 2002

Fund raising was tough in 2002 with European figures plummeting by almost 30 per cent in 2002, according to private equity research firm AltAssets. A total of 57 funds held a final close in 2002 with a combined value of €27.4 billion.

Buyout funds fared better than venture fund raisings and although buyout and venture firms raised an almost equal number of funds, buyouts accounted for over two-thirds of the total value of fund raising. Nine mega-funds (of over €1 billion) comprised €19.6 billion of the total with private equity heavyweights such as Cinven, Bridgepoint, Candover and Barclays all exceeding their initial target sizes to raise mega-funds.

The UK still accounts for the largest portion of European fund raising, reflecting the fact that most pan-European funds are based in London. UK-based funds made up 77 per cent of the total value of funds raised in 2002 with €21.1 billion. Eight of the nine mega-funds raised this year were UK-based and accounted for €17.7 billion. France-based funds comprised 12 per cent of European funds with €3.3 billion, reflecting an enthusiasm among investors for the French market. Scandinavian funds took four per cent of the European total with €1.1 billion, 47 per cent of this was venture. Three Swiss funds captured €670 million for just over two per cent of the total value. All of these were fund-of-funds.

Over three-quarters of the funds which closed in 2002 were in the market for more than twelve months, illustrating the increased difficulty in securing commitments. Chris Davison, head of research at AltAssets, said: “As expected, there was a big drop in fund raising last year, but the breakdown shows a less bleak picture for some parts of the industry. Venture firms had a very tough time, as you would imagine from the scale of the downturn in technology markets since the boom years, but the buyout sector had a much more respectable experience.”

He added that there is no reason to expect much difference in 2003. It will be tough, but it should not necessarily be any harder than last year, he said. The expectation is that 2002 and 2003 will prove good years for private equity firms to make investments.