Despite the higher profitability than other assets, its weight in the portfolios of large investors is very low
Madrid, 28 (Europe Press)
The net internal rate of return (IRR) of private equity funds in Spain exceeded 13.1%, in the average of various issues between 2006 and 2019, in line with the results presented in other European countries and significantly higher than other investment assets.
In the case of the five funds divested by Fond-ICO Global, profitability was 18.2%, according to an analysis by Spanish private equity operator Ascri and BCG Consulting, which was presented Thursday.
The estimated net profitability of expansion capital and “ investment capital ” in the active fund portfolio of Fond-ICO was 11.6% at the end of 2019, according to the study “ Private capital potential of insurance companies and pension funds in Spain. “.
The analysis says, “The different calculation methodologies do not allow direct comparison, but similar IRR values have been observed between 10% and 15%,” which puts the net IRR for France at 11.4% in 15 years and 12.5% of the overall profitability of these funds in Italy In ten years.
The analysis indicates that the profitability of “ venture capital ” in Europe was 22% between 2009 and 2019, decreased to 15.3% in “ leveraged buying ” in that ten-year period and was 15% in the expansion strategy.
Likewise, the report includes assessments from international investors who have asserted that “the sector in Spain offers good returns or higher than those in other neighboring countries.”
They warn that “if it continues to attract international attention, competition for assets may reduce marginal returns, but we still see the possibility of continuing investment in Spain with attractive returns.”
The average private capital investment in Spanish companies was 0.68% of GDP in 2019 and surpassed, for the first time, the European average set at 0.53% of GDP that year. However, there is still potential for improvement compared to other neighboring countries such as the Baltic countries (0.95%), the United Kingdom (0.89%), the Netherlands (0.83%), Sweden (0.82%) or Norway (0.75%).
According to Ascri data, at the end of 2019, the private capital sector has benefited 2,627 companies in which it participates in Spain, employing around 440,000 workers.
Employers estimate that companies in which the funds participated increased employment by 32% compared to their peers without private capital participation, in addition to increasing their sales by 18% and improving their total operating profit (Ebitda) by 52% compared to them.
Insurers and pension funds are few
The study highlights that the rate of investment in private capital by national institutions, such as insurance companies and pension funds, is significantly lower in Spain than in other countries. In addition, of the investment that these two institutions make in “private capital”, it accounts for about 25% of national assets and 40% of international assets.
Compared to the global average, investment in private capital by insurance companies in Spain is 0.1% of their funds to invest (compared to 2%), in pension funds it represents 1% (compared to 8.7%), in private banking 3% (Compared to 7.5%) and in “family offices” the difference is smaller, with 17% in Spain and 20% worldwide.
To improve this situation, the employer is of the view that the regulator should review the legislation on back-to-back committees of individual pension funds and make investment transactions of employment funds more flexible, among other recommendations regarding regulations on capital consumption for insurance companies.
An analysis of new funds raised by domestic fund managers in 2019 concludes that fund-raising from insurance companies and pension funds is lower than those in neighboring countries.
Therefore, Ascri justifies that investment in private capital in Spain “depends heavily” on investments by international managers, which accounted for 80% of the volume of investments in 2020.