Private equity firms are less optimistic about UK growth prospects over the next 12 months than they were in 2011, according to Investec.
Research by the fund finance firm indicated that the majority of general partners in private equity firms still expect the economic environment to improve, but less than a third expect their next fund will be larger than the current one.
Of these, 70% say that their next fund will be no more than 20% larger, in comparison to last year when 85% said their fund will be at least 20% bigger. Only 10% believe that their next fund will be smaller, with the majority predicting it will be around the same size.
Simon Hamilton, 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.
Despite these difficult conditions, optimism levels are significantly higher than in 2009, when 11% of partners predicted than they would not raise another fund. This year the figure has more than halved to 5%.
The Investec Fund Finance team focuses on the financing needs of leading private equity funds and the professionals behind them. Typically, the loan sizes are greater than £5 million and can extend to between £50 million and £100 million at the higher end. The loans are usually structured against the private equity investments, management company cash flows or investor commitments.