Survey: German PE Market Embraces Secondaries

The extent of the private equity market’s growing appeal and reach and the rapidly expanding use of the secondary market was evident with the release of a new study that examined the state of German private equity. London’s Greenpark Capital and German investment manager Unigestion recently released a study that found Germany’s private equity market is becoming more institutionalized at a faster pace than other parts of the globe and the country is embracing the secondary market more quickly and eagerly than the global average.

Chief among the findings is that institutional investors in Germany have increased their allocations to the private equity asset class by 25% since 2003. This is beyond the allocation patterns and practices of most developed countries, according to the survey.

It is the institutional commitment to secondary funds that the survey argued establishes Germany’s maturity in the asset class. Seven percent of German institutional investors’ private equity allocation is going to secondary funds, more than twice the global average of 3 percent. The survey found that 18% of German institutional investors have already invested in secondary funds and that 11% of the capital invested in private equity was done through the secondary market.

“Germany is set to become an increasingly significant market both for private equity funds of funds and dedicated secondaries players in the next few years,” Unigestion Vice President and Director for Private Equity Francesco di Valmarana said in a statement.

Germany has seen some large secondary deals in recent years, thanks in part to the presence of large banks and financial institutions that have been in the process of shedding non-core private equity assets. The survey says that 66% of those that sold assets on the secondary market did so for reasons other than simply exiting private equity.

As cited in the survey, European private equity funds are valued at $306.5 billion by Thomson Financial (publisher of Buyouts) and currently comprise 27% of the $1.13 billion in total private equity funds raised between 1999 and 2005. The survey cited data that pegs European secondary funds at $10 billion, and secondary funds accounting for $37 billion, or about 3% of the total private equity funds under management.

Greenpark Capital manages more than $700 million and focuses on European secondary deals in buyout, venture and other private equity investments. Unigestion is a Geneva-based asset management firm that invests in both public and private markets and manages about $8.7 billion (€6.8 billion). The study was conducted by Greenpark and Unigestion in conjunction with Dr. Stefan Jugel, a professor from the Weisbadener Private Equity Institute in Germany. —M.S.