Private Equity 2010 www.TheCityUK.com SIZE AND REGIONAL BREAKDOWN Global trends The private equity industry has over the past two years seen the biggest downturn in activity in more than a decade Investments, funds raised and exit levels were all well down on levels seen prior to the economic slowdown The industry nevertheless remains an important source of funds for startup and young firms, firms in financial distress and those seeking buyout financing The UK remains the largest and most developed private equity centre in Europe, second in size globally only to the US London is one of the leading international centres for the management of private equity investments along with New York Investments According to TheCityUK estimates, $91bn1 of private equity was invested globally in 2009, a significant fall from the $181bn invested in the previous year (Chart 1) The 2009 total was more than 70% down on record levels seen in 2007 Deal making however gathered momentum during the year with larger deals announced towards the end of 2009 With bank lending in short supply, the average cost of debt financing was up and private equity firms were forced to contribute a bigger proportion of equity into their deals (Chart 2) Indicators for the first half of 2010 show that investment activity totalled $55bn with private equity firms continuing to focus on investments in small and medium sized companies The half-year total was up slightly on the same period in 2009 but well down on the period between 2005 and 2008 Full year figures for 2010 may show a moderate increase on 2009 if the gradual recovery in investments seen in recent months is sustained Private-equity backed deals generated 6.3% of global M&A volume in 2009, the lowest level in more than a decade and down from the all-time high of 21% in 2006 This grew to 6.9% in the first half of 2010 The economic slowdown is also having an impact on completed deals Over the next five years, over $800bn in loans extended on these deals are due to be refinanced (Chart 3) Around 60% of this is in bank loans and the remainder in high-yield bonds While leveraged loan issuance for buyouts in 2009 fell to a fraction of the levels seen prior to the economic slowdown, high-yield debt issuance saw a three-fold increase to $210bn Most of this went into refinancing existing portfolio company debt as the high-yield bond market filled the financing gap left by the decline in bank lending Buyouts’ share of total investments fell for the second year running in 2009 to 57% from 66% in the previous year, a direct result of the scarcity and higher cost of debt Despite an increase in the share of total investments, venture capital deals were down by around a third in 2009 The fall in investment activity and economic slowdown have more recently given a boost to the secondary market for private equity where existing stakes are bought and sold between private equity firms Funds raised fell by two-thirds in 2009 to $150bn, the lowest annual amount raised since 2004 The difficult fund raising conditions have continued into 2010 with half yearly figures showing a total of $70bn raised in the first six months, slightly below the same period in 2009 The average time taken for funds to achieve a final close more than doubled Data from various sources may not be entirely comparable due to differing methodologies TheCityUK relies on public sources of data for this report, primarily organisations that collect data and publish newsletters and reports for the private equity community August 2010 Chart Global private equity market investments and funds raised $bn 500 Funds raised Investments1 400 300 200 100 2000 2002 2004 2006 2008 2010 2001 2003 2005 2007 2009 equity value of deals Source: TheCityUK estimates based on PEREP_Analytics, Thomson Reuters, EVCA, PwC, AVCJ data Table Top countries for private equity investments and funds raised $bn 2009 2008 -Investment Funds Investment Funds value raised value raised US 33 48 100 288 UK 12 32 65 China 13 13 France 12 15 India 11 Germany 10 Japan 10 Others 25 45 23 55 Total 91 181 150 450 Source: TheCityUK estimates based on PEREP_Analytics, Thomson Reuters, EVCA, PwC, AVCJ data Chart Financing for leveraged buyouts $bn, loan issuance for LBO transactions 550 equity contribution to leveraged buyouts (% share) 50 500 450 40 400 350 300 250 200 30 20 150 100 10 50 2000 2002 2004 2006 2008 2001 2003 2005 2007 2009 Source: Thomson Reuters, Standard & Poors, TheCityUK Sponsored by: TheCityUK between 2004 and 2010 to almost 20 months and in some cases the final amounts raised were below original targets Prior to the economic slowdown, the market saw intense competition for private equity financing The three years up to 2009 saw an unprecedented amount of activity during which more than $1.4 trillion in funds were raised Funds under management Private equity funds under management totalled $2.5 trillion at the end of 2009 (Chart 4), slightly up on 2008 Growth of funds under management in recent years has been due to lower investment activity and an increase in unrealised portfolio investments, as firms have been reluctant to exit their stakes in market conditions of falling valuations Funds available for investments totalled 40% of overall assets under management or some $1 trillion Around a half of this is allocated for use in buyouts, $160bn for venture capital investments and the remainder for use in acquiring real estate A substantial amount of this money needs to be invested over the next couple of years because many funds impose investment periods beyond which the funds are under obligation to return the money to investors Potential changes in financial regulation may place additional requirements and restrictions on private equity funds There is considerable uncertainty around the detail of any future regulatory changes In the US, lawmakers passed a financial reform bill in July 2010 that will require private equity funds with more than $150bn in assets to register with the the Securities and Exchange Commission In Europe, the proposed Directive on Alternative Fund Managers may bring a number of changes including new disclosure requirements, harmonised governance standards, and limits on leverage At this point, however, the provisions, and therefore the impact of the Directive on European and foreign firms operating in the EU remains unclear The remaining stages of the legislative process are likely to continue into the latter part of 2010 Private Equity 2010 Chart Maturity schedule of US high yield debt $bn, maturity schedule of US high-yield debt (as of end-November, 2009) 350 Leveraged loans High-yield bonds 300 250 200 150 100 50 2010 2011 2012 2013 2014 2015 2016 based on high-yield bond and leveraged loan maturities; includes all US dollar denominated debt Source: Bank of America Merrill Lynch Chart Private equity worldwide assets under management $bn Unrealised portfolio value 2,500 Funds available for investment 2,000 The UK private equity market is the most developed outside the US Private equity funds based in the UK accounted for 13% of global investments and 5% of funds raised Other large centres for private equity in Europe include France, Germany, Sweden, Netherlands and Spain New York and London are the leading locations for private equity firms Amongst the largest 50 private equity firms, 14 were headquartered in New York and in London 60% 46% 40% 40% 2007 2008 2009 54% 1,500 57% 1,000 53% Regional breakdown of private equity activity shows that in 2009, North America accounted for 36% of private equity investments, up from 26% in the previous year (Table 1, Chart 5) while its share of funds raised remained at around two-thirds of the total Europe’s share of investments fell from 44% to 37% during the year Its share of funds also declined, from 25% to 15% While investments have fallen in most regions in recent years, there has been a rise in the importance of Asia-Pacific and emerging markets, particularly China, Singapore, South Korea and India This is partly due to the smaller impact of the economic crisis on this region and better prospects for economic growth The proportion of investors’ total private equity commitments going to emerging markets is likely to double over the next couple of years 60% 56% 59% 500 47% 44% 41% 2003 2004 2005 43% 2006 Source: Preqin; TheCityUK estimates Chart Regional breakdown of private equity investments and funds raised % share 100 80 Funds raised 2% 4% 11% 15% Investments 6% 24% 25% Private equity is a broad term that refers to any type of equity investment in an asset in which the equity is not freely tradable on a public stock market This also includes public companies that are delisted as part of the transaction Other 21% Asia/ Pacific 37% Europe 36% North America 15% 60 44% 40 63% 66% 20 26% Definition of private equity 6% 2008 2009 2008 2009 Source: TheCityUK estimates based on PEREP_Analytics, Thomson Reuters, EVCA, PwC, AVCJ data TheCityUK Firms located in New York accounted for 36% of funds raised in the five years up to 2009 Firms in London accounted for 17% (Chart 6) Private Equity 2010 Chart London vs New York - share of private equity industry, 2009 Table Private equity investments and funds raised in Europe $bn, 2009 Investments Country of Country of manag destination 6.6 12.4 UK 4.3 4.7 France 3.8 3.3 Germany 1.4 1.7 Sweden 17.4 11.3 Others 33.5 33.5 Total Funds raised Country of Country of origin manag 7.7 3.7 3.0 2.7 1.3 1.1 0.6 0.6 10.0 14.5 22.6 22.6 UK trends The UK is the largest European centre for the management of private equity investments and funds (Table 2) Source: PEREP_Analytics, EVCA Firms located in the UK have also attracted the largest proportion of European private equity investments in recent years Many factors contribute to the attraction of the UK as a centre for private equity such as: the availability of funds to invest; opportunities to make investments, people with the necessary skills to source, negotiate, structure and manage investments; and the availability of exit opportunities given the large equity market Investments Worldwide investments of UK private equity firms mirrored falls on the global markets and declined to £7.5bn in 2009 from £20bn in 2008 and £32bn two years earlier according to the BVCA survey of its members (Chart 7) Investments were made in 987 companies in 2009, the smallest number in over a decade, and down from 1,672 in the previous year Early indicators for 2010 show a pickup in activity According to figures from the Centre for Management Buyout Research, more than £5bn of buyouts were completed in the first quarter This was the highest quarterly total for two years, and was driven by a surge in secondary buyouts The UK private equity industry has become more global over the past decade In 2009, private equity firms in the UK invested 61% of their funds in companies located overseas, up from 58% a year earlier Over a half of overseas investments were in Continental European countries, and around 40% in the US The UK’s influence overseas is considerable, both through direct investment from the UK offices of private equity firms and through their offices overseas number 30 23 New York London Other % share 50 47% 25 36% 40 20 30 15 10 14 20 17% 10 Headquartered Five-year to end-2009 firms from Top 50 fund-raising total Source: PEI 50 rankings Chart UK private equity investments and funds raised1 £bn, funds raised (bars) £bn, investments (lines) 35 35 30 30 25 25 20 20 15 15 10 10 5 2000 2002 2004 2006 2008 2001 2003 2005 2007 2009 data not comparable with EVCA data as it only includes independent funds raised and BVCA member investments Source: BVCA A regional breakdown of investment activity in the UK shows that firms located in London saw investment levels decline to £647m in 2009 from £3.6bn in the previous year London’s share of UK investments fell from 42% to 23% The share of investments in other South-Eastern cities increased from 15% to 39% during the year Scotland’s share fell Table Regional breakdown of UK private equity investments slightly to 11% Most other regions apart from the North East % share experienced falling investment amounts in 2009 (Table 3) 2009 Funds raised in the UK totalled £2.9bn in 2009, significantly down on the £23.1bn raised in 2008 and £29.3bn raised in 2007 (Chart 7) Overseas investors generated around 60% of funds raised Secondary market for private equity, pools capital from investors to purchase existing stakes in private equity funds It has attracted considerable investor interest in 2009 A record $17.5bn in capital was raised during the year, up 85% on 2008 (Chart 8) The record fund raising activity however did not translate into increased deal making activity as potential sellers were unwilling to dispose of their assets at the low prices buyers were offering The market is likely to pick-up in South East (excluding London) London South West East of England West Midlands East Midlands Yorkshire & The Humber North West North East Scotland Wales Northern Ireland Total Source: BVCA £m Number of cos 199 1,162 647 190 115 66 66 36 45 74 36 132 70 56 124 55 188 47 39 315 52 63 13 834 2,957 £m Number of cos 39 24 22 23 4 4 7 6 11 100 100 TheCityUK 2010 as there has been a narrowing of bid-ask spreads According to Preqin, Europe has seen a surge in secondary buyouts in the first quarter of 2010, with 24 secondary buyouts announced during the quarter, representing $7bn in aggregate deal value, surpassing the $5.1bn in aggregate deal value from 43 secondary buyouts in the whole of 2009 There is probably some $100bn of private equity interests that will become available for sale over the next two to three years North American fund managers dominate the secondary market with close to a half of funds purchased in this region in 2009 Europe accounted for 42% and Asia for most of the remainder FINANCING STAGE AND INDUSTRY BREAKDOWN Private Equity 2010 Chart Global private equity secondary market Total secondary funds raised, $bn 17.5 15.0 12.5 10.0 7.5 5.0 Private equity investments and funds raised can be categorised according to the financing stage into: venture capital; buyouts and special situations Buyouts generally account for the bulk of investments by value due to the significantly larger size of such deals compared with other investments Venture capital accounts for the majority of investments by number Investments Globally, buyouts’ share of the value of private equity investments dropped in 2009 to 57% from 66% in the previous year as difficulties in obtaining bank loans to finance deals persisted for the second year running (Chart 8) A general deleveraging has occurred over the past two years According to TheCityUK estimates, equity contribution to leveraged buyouts rose to over a half in 2009 from 43% in 2008 and 33% two years earlier (Chart 2) Venture capital investments were down by about a third in 2009 from recent years’ levels (Chart 10) The biggest buyouts in 2009 and the first half of 2010 included the $5.2bn acquisition of IMS Health Inc by TPG Capital LP, the $3.9bn acquisition of Talecris Biotherapeutics by Grifols SA, and the $3.4bn acquisition of Springer Science Business Media by GIC Special Investments PTE/EQT Partners AB These deals however were small compared with some of the 2.5 0.0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Source: Probitas Partners; Dow Jones Chart Private equity investments by financing stage % share of investments 2008 100 Buyouts Venture capital 2009 80 64% 66% 36% 34% 57% 59% 60 40 20 41% 43% Private equity activity Investments represent the financing of businesses through venture capital, buyouts and other forms of financing Venture capital represents investment in companies that have undeveloped or developing products Investments can be classified into: - Seed stage: Financing provided to research, assess and develop an initial concept before a business has reached the start-up phase - Start-up stage: Financing for product development and initial marketing - Expansion stage: Financing for growth and expansion of a company which is breaking even or trading profitably UK World UK World Source: TheCityUK estimates based on PEREP_Analytics, Thomson Reuters, EVCA, PwC, BVCA, AVCJ data Chart 10 Venture capital investments $bn 150 120 - Replacement capital: Purchase of shares from another investor or to reduce gearing via the refinancing of debt Buyout funds typically target the acquisition of a significant portion or majority control of businesses which normally entails a change of ownership These are generally investments in more mature companies 90 60 Special situation includes a range of investments such as distressed debt, equity-linked debt, project finance and leasing This category includes investment in subordinated debt, referred to as mezzanine debt financing 30 Fund raising refers to the money investors have committed to private equity funds in any one year Divestments represent the realisation or exiting of a private equity investment This is generally done by: selling the company; writing off the investment or floating the company on a stock market Asia and other Europe US 2000 2002 2004 2006 2008 2001 2003 2005 2007 2009 Source: TheCityUK estimates based on PEREP_Analytics, Thomson Reuters, EVCA, PwC, AVCJ data TheCityUK Private Equity 2010 large buyouts in the years preceeding the credit crisis (Table 4) Buyout managers are shifting funds to distressed debt, bankruptcy financing, private investments in public equity, emerging markets and financial institutions In the UK, management buyouts and buyins generated 36% of private equity investments in 2009 Expansion stage companies accounted for 36% with the remainder split between replacement capital and early stage investments Funds raised Globally 57% of funds raised in 2009 are expected to be allocated to buyouts, down from 66% in the previous year Of total funds raised in the UK in 2009, over 80% of capital is expected to be invested in buyouts (Chart 11) Divestments (exits) Private equity firms buy companies in order to sell them at a profit at a later stage This has become more difficult since the start of the economic slowdown Private equity exit transactions in which portfolio companies are sold to a buyer or another private equity firm totalled $81bn globally in 2009, down from $151bn in the previous year, and the lowest amount since 2003 Divestment activity has however gradually increased during 2009 Both sales to corporations and sales to other private equity firms were down in 2009, while IPOs increased as recovering equity markets made them viable exit alternatives Data for the UK shows that in 2009 divestments totalled £3.9bn The biggest proportion of divestments came from write offs and trade sales (each accounting for around a quarter of the total), repayment of preference shares/loans (8%) Chart 11 Private equity funds raised by expected stage of investment % share 100 Buyouts Venture capital 2009 2008 7% 19% 34% 80 43% 60 40 81% 93% 66% 57% 20 UK World UK World Source: TheCityUK estimates based on PEREP_Analytics, Thomson Reuters, EVCA, PwC, BVCA, AVCJ data Chart 12 Global private equity divestments $bn, amount divested 400 IPOs 350 Secondary sales Sales to corporations 300 250 Industry breakdown High-tech, consumer, communications and other services sectors have attracted a large proportion of private equity investments worldwide over the past decade In the UK, consumer services generated 23% on investments in 2009 (down from 22% in 2008), followed by industrials 15% (down from 27%), consumer goods 15% (up from 5%) and financial services 11% (unchanged) 150 100 50 2000 2002 2004 2006 2008 2001 2003 2005 2007 2009 Source: Dealogic STRUCTURE OF THE PRIVATE EQUITY MARKET A private equity firm is usually structured as a limited partnership, where the general partner receives capital from limited partners (pension funds, hedge funds, etc), and pays the managers, advisers and lenders out of fees Investors in private equity The number and variety of groups that invest in private equity have expanded to include a wide range of investors The majority of capital comes from institutional investors with long-term commitments and new categories of investors such as sovereign wealth funds Banks were the largest providers of capital in Europe in 2009, with 18% of total funds raised, followed by pension funds and fund of funds with 200 Chart 13 UK private equity divestments £bn, amount divested, 2009 Table Largest private equity transactions Announcement year $bn Largest private equity transactions (2009-1H 2010) 3.9 Talecris Biotherapeutics 3.1 Bridas Corp 3.0 Interactive Data Corp 2.1 Healthscope Ltd 1.7 Michael Foods Inc Largest private equity transactions (all-time) TXU (2007) Equity Office Prop Trust (2006) Hospital Corp of Amer (2006) RJR Nabisco (1989) Harrah's Entertainment (2006) Clear Channel Comm (2006) Source: Fortune 43.8 38.9 32.7 31.1 27.4 25.7 Write-off Other 32% Sale to another 6% private equity firm 8% 27% 27% Trade sale Repayment of preference shares/loans Total: 3,878m Source: BVCA TheCityUK Private Equity 2010 around 14% each (Chart 14) The next largest providers were government agencies 12% and insurance companies 9% Overseas investors accounted for nearly 60% of funds raised in the UK The US accounted for 37% of total overseas funds, followed by China 9% and France 7% Pension funds and fund of funds were the largest investors in UK funds each with around 18% of the amount raised in 2009 They were followed by banks and insurance companies with 17% and government agencies 6% (Chart 14) In early 2010, the UK Government began the process of distributing funds from its £200m UK Innovation Investment fund The fund is focusing on early start-up firms in life sciences, digital and advanced manufacturing business Chart 14 Sources of new funds raised % share, 2009 Other 33% Insurance companies 36% 9% 12% 14% Government agencies 4% 6% Private individuals Government agencies 17% Banks & insurance companies Total: $22.6bn Table Largest private equity firms Firms ranked by amount of capital raised for direct private equity investment in years up to end-2009 Goldman Sachs Principal Inv Area New York The Carlyle Group Washington DC Kohlberg Kravis Roberts New York TPG Fort Worth (Texas) Apollo Global Management New York Bain Capital London CVC Capital Partners New York The Blackstone Group Boston Bain Capital New York Warburg Pincus London Source: Private Equity International Chart 16 Institutional investment in private equity Average allocation as a % of total assets Family Offices/ Foundations ISSUERS Private equity fund Private equity fund Private equity fund Direct Investments Special situation Buyouts Source: Federal Reserve Bank of Dallas, EVCA/Thomson Reuters/PricewaterhouseCoopers 8.3% Asset managers Start-up Replacement capital 8.9% Endowment plans Seed Venture capital 6.5% Public pension funds 5.0% Private sector pension funds Sovereign Wealth Funds 4.3% 3.7% Insurance companies Source: Preqin Fund of funds Source: PEREP_Analytics, EVCA, Thomson Reuters, PwC, BVCA Expansion Fund of Funds Fund of funds 18% Total: £2.9bn INTERMEDIARIES Investing in private equity funds 18% 14% Pension funds Chart 15 Private equity market INVESTORS Other 18% Issuers As private equity is one of the most expensive forms of finance, issuers generally are firms that not have an alternative source of financing such as a bank loan, private placement or the public equity market Firms seeking venture capital are typically young firms that are projected to show high growth rates Seed or start-up capital is the money used to purchase equity-based interest in a new or existing company which is not yet operational Venture capital also includes early-stage capital provided for companies that have commenced trading but have not moved into profitability or proved its commercial viability Later stage investments where the product or service is widely available are also considered as venture capital investments pension funds endowments foundations bank holding companies - high-net-worth individuals - insurance companies - investment banks - corporations - sovereign wealth funds - other investors Pension funds Banks Intermediaries The growth in the private equity market over the past decade is largely attributable to the emergence of private equity funds that raise and invest funds from investors Private equity funds are organised mainly as limited partnerships Investors who contribute to the fund’s capital are the limited partners while professional managers running the fund serve as the general partners About four-fifths of private equity investments flow through specialised intermediaries, almost all of which are in the form of limited partnerships The remainder is invested directly in firms through co-investments (direct investing alongside private equity firms) and other forms of direct investments - UK Europe (including UK) 2.6% 10 $bn 54.6 47.8 47.0 45.1 34.7 34.2 31.1 29.2 23.0 21.7 TheCityUK Contribution to the UK economy Over the past two decades, the UK private equity industry has invested over £150bn in around 30,000 firms worldwide The BVCA has drawn attention to the significant contribution to the UK economy made by private equity: - Companies that have received private equity backing in the UK account for employment of around million people, or 16% of UK private sector employees In addition private equity funds based in the UK employ several thousand people Private Equity 2010 Chart 17 Private equity returns in Europe year rolling net return, % 25 20 - Through investment overseas, the industry contributes to the current account of the UK balance of payments through income and capital gains Exports of private equity backed companies grew by 10% annually over the five years to 2006/07 totalling a cumulative £188bn in export sales during this period 15 - Sales revenue of private equity backed companies rose by 8% a year between 2001/02 and 2006/07 (Chart 19) totalling £1,331bn during this period Private equity backed companies contributed £35bn in taxes in 2006/07 - Higher rate of return provides an attractive asset for institutional investors, lifting prospective income of their clients Non-venture private equity investments include middle-market companies that use the private equity market to raise finance for expansion or a change in their capital structure Public companies can also be issuers in the non-venture private equity market These companies issue a combination of debt and private equity to finance a management or leveraged buyout They also issue private equity to help them through periods of financial distress Agents and advisers are an integral part of the private equity market They represent “information producers” whose role is to place private equity, raise funds for private equity partnerships and evaluate partnerships for potential investors The three main types of agents and advisers include: those helping firms raise private equity through search and evaluation services; those helping limited partnerships raise funds typically through buyouts and distressed debt; and those advising institutional investors on the placement of funds they have allocated to the private equity market 10 -5 1985 1990 1995 2009 Private equity 10 years (% p.a.) Pension assets1 FTSE All-share Private equity Pension assets1 years (% p.a.) FTSE All-share Private equity years (% p.a.) Pension assets1 An important reason for increased interest in the private equity market since the 1980s has been the fact that private equity investments on average have generated consistently higher returns than most public equity markets and bond markets As private equity investments are generally medium and long term investments, one year returns are inappropriate as a realistic measure of private equity performance due to the volatility in returns WM All Funds Universe Source: BVCA Over the past two decades private equity has become broadly accepted as an asset class Investing in private equity contributes to portfolio diversification Although there is some correlation between returns on private equity and public equity and bond markets the correlation is not high For many institutions, the potential higher returns of private equity investments over conventional asset classes justify the higher risk of such investments Private equity investments are relatively illiquid, particularly in the early years The life-cycle of an average private equity fund investment averages three to seven years Investors in private securities generally exit their investment and achieve returns through an initial public offering, a sale (to corporate buyers or another private equity firm), a merger, or a recapitalization As the companies are not listed on a public exchange, investors wishing to exit their private equity holding so by selling the holding to another investor through the secondary market 2009 Chart 18 UK private equity returns FTSE All-share Private equity as an asset class 2005 Source: Thomson Reuters; EVCA PRIVATE EQUITY AS AN ALTERNATIVE INVESTMENT A marked drop in returns was however seen in 2008 and 2009 One-year 2000 -5 10 15 20 Chart 19 Comparative growth % annual growth, (2001/02-2006/07) UK employment Sales revenue Private equity FTSE 100 FTSE Mid-250 FTSE Mid-250 Private equity FTSE 100 Source: BVCA TheCityUK Private Equity 2010 returns for European private equity averaged 3.1% in 2009 This included a 3.5% return for buyouts and a negative 1.3% return for venture capital The private equity industry has produced strong returns in the years leading up to the credit-crisis The year rolling net return in Europe totalled 6.1% in 2009 (Chart 17) down from 8.5% in 2008 The long term performance of the European private equity industry remains robust, with net internal rate of return since inception to December 2009 remaining strongly in positive territory, at 8.8% for all private equity, with buyout funds returning 11.8% and venture funds returning 1.6% The net return of UK private equity funds measured at end-2008 was: years 4.4%, five years 17.3% and ten years 13.1% Private equity in the UK significantly outperformed a number of major indices such as the FTSE All UK equities and WM All Funds Universe (Chart 18) US institutional investors allocate an average of 7% of portfolios to private equity, a higher proportion than the 5% share in Europe and 3% in Japan It is likely that private equity allocation from all types of investors declined since the start of the credit crisis as investors looked for safe investments LINKS­TO­OTHER­SOURCES­OF­INFORMATION: BVCA Thomson Reuters Dealogic Preqin EVCA PricewaterhouseCoopers PEREP_Analytics Private Equity International www.bvca.co.uk www.thomsonreuters.com www.dealogic.com www.preqin.com www.evca.eu www.pwcmoneytree.com www.perepanalytics.eu www.peimedia.com Datafiles ­ Datafiles in Excel format for all charts and tables published in this report can be downloaded from the Reports section of TheCityUK’s website www.TheCityUK.com Report author: Marko Maslakovic, Senior Manager, Economic Research, marko.maslakovic@TheCityUK.com, +44 (0)20 7776 8977 Sign up for new reports If you would like to receive immediate notification by email of new TheCityUK reports on the day of release please send your email address to signup@TheCityUK.com TheCityUK Research Centre: For further information about our work, or to comment on the programme/reports, please contact: Leslie Sopp, Head of Research leslie.sopp@TheCityUK.com, +44 (0)20 7776 8979 TheCityUK, 65a Basinghall Street, EC2V 5DZ www.TheCityUK.com © Copyright August 2010, TheCityUK TheCityUK is a new independent membership body, promoting the UK financial and related professional services industry The CityUK’s key areas of activity include: - Promoting the UK-based industry as a world leader offering unrivalled service and expertise to partners around the world - Creating a partnership for a sustainable industry: demonstrating the industry’s role in enabling growth and prosperity in the wider UK economy - Using research, insight, data and analysis to meet the needs of its members and to provide the evidence to support our promotional objectives This report is based upon material in TheCityUK’s possession or supplied to us, which we believe to be reliable Whilst every effort has been made to ensure its accuracy, we cannot offer any guarantee that factual errors may not have occurred Neither TheCityUK nor any officer or employee thereof accepts any liability or responsibility for any direct or indirect damage, consequential or other loss suffered by reason of inaccuracy or incorrectness This publication is provided to you for information purposes and is not intended as an offer or solicitation for the purchase or sale of any financial instrument, or as the provision of financial advice Copyright protection exists in this publication and it may not be reproduced or published in another format by any person, for any purpose Please cite source when quoting All rights are reserved  ... employment Sales revenue Private equity FTSE 100 FTSE Mid-250 FTSE Mid-250 Private equity FTSE 100 Source: BVCA TheCityUK Private Equity 2010 returns for European private equity averaged 3.1% in... to the private equity market 10 -5 1985 1990 1995 2009 Private equity 10 years (% p.a.) Pension assets1 FTSE All-share Private equity Pension assets1 years (% p.a.) FTSE All-share Private equity. .. Source: Private Equity International Chart 16 Institutional investment in private equity Average allocation as a % of total assets Family Offices/ Foundations ISSUERS Private equity fund Private equity