With the UK back in recession and the eurozone seemingly no closer to finding a real solution to its crisis, a fall in market sentiment was perhaps inevitable. According to a new survey conducted by Investec Fund Finance, 57 per cent of general partners (GPs) at UK-based private equity firms still expect the economic environment in the country to improve over the next 12 months. This is a marked drop from 81 per cent last year.
The survey, conducted by Investec during February-March this year, also revealed that under a third (31 per cent) believed that their firms’ next fund will be larger than the current one, compared with nearly half (43 per cent) in 2011. Of these, 70 per cent say their next fund will be no more than 20 per cent larger; last year, 85 per cent said their fund would be at least 20 per cent bigger.
Some 77 per cent rate the current environment for raising a new fund as "very poor" or "quite poor".
It's not all doom and gloom, however. Just 10 per cent believe their next fund will be smaller, with 54 per cent predicting it will be about the same size.
Simon Hamilton of Investec Fund Finance, said:
While the majority of GPs remain optimistic about the UK economy’s growth prospects, the findings paint a very different picture from last year’s bullishness. Concerns around fund raising have become more acute and as conditions show little sign of improvement it’s likely that more firms will end up with funds that are either the same size or smaller than the current one.
However, despite battling against tough economic headwinds the private equity industry continues to demonstrate resilience and tenacity; levels of optimism are significantly higher now than in 2009, when 11 per cent of GPs predicted they would not raise another fund. This year the figure has more than halved to 5 per cent.