Invest Europe

Today saw the publication of the European Capital Requirements package review, implementing into EU law the standards set at international level by the Basel Committee.

Over the past 5 years, banks invested €21 billion into private equity, making up around 5% of the overall capital raised by these funds. Through private equity, banks supported indirectly thousands of businesses across the continent, including start-ups and scale-ups which benefitted from such equity to grow. Yet, banks’ commitments to the asset class remain very low and have decreased by more than 100% compared to other fundraising sources in the past decade.

In that context, Invest Europe welcomes that, for the first time, “investments in private equity” are no longer deemed “high-risk exposures” in the new framework. Moreover, the explicit recognition that long-term exposures (such as those to closed-ended funds) shall never be considered speculative is a long-awaited step towards acknowledging the actual risk of long-term, non-redeemable commitments.

These helpful changes do not mask the fact that the EU’s strict implementation of the Basel standards will lead to a significant increase in capital charges for banks’ equity investments and still does not appropriately capture the actual risk of long-term capital. If amendments to reflect the specificities of European markets are not introduced during upcoming negotiations, the review could further limit banks’ contribution to long-term growth and, more broadly, to the Capital Markets Union objectives.

As the representative of the European private equity community, including banks investing into equity funds, Invest Europe is looking forward to working with the co-legislators to determine how credit institutions can commit some of their capital to long-term funds while maintaining the high prudential standards of the framework. As we pointed out in a recent opinion piece, it is only by appropriately balancing audacity and prudence that institutional investors will be able to overcome tomorrow’s challenges.

For more details on Invest Europe’s position on the prudential reviews, please look at our position paper here.

• Invest Europe commits to contribute to the EU becoming climate-neutral by 2050

Invest Europe, the association representing Europe’s private equity, venture capital, and infrastructure sectors, as well as their investors, has decided on its climate ambition. The mission statement will serve as clear guiding principles for its work, both internally and externally, in the years to come.

As the representative organisation for an industry that has an unparalleled skillset in long-term financing of transitions, delivering change management and strategic direction, Invest Europe is uniquely placed to play a meaningful and positive role in achieving the climate neutrality goals set out by the EU and by global partners in the Paris Accord. Hence, Invest Europe commits to actively contribute to the EU becoming climate-neutral by 2050.

Invest Europe, as an association, also pledges to take the necessary steps to become a carbon-neutral organisation by 2030.

In order to achieve the mission statement’s ambitious aspirations, Invest Europe will continue to deploy a comprehensive strategy focused on five key areas:

1. Participate in the public policy debate on sustainable finance;
2. Engage constructively with stakeholders on climate neutrality;
3. Deliver education and training aimed at promoting sustainability in private equity;
4. Provide a platform for the industry to share insight, best practice, and knowledge;
5. Remain a thought-leader, guiding the industry and raising the bar with initiatives aimed at meeting climate responsibilities.

This integrated approach represents Invest Europe’s commitment to broaden the scope of its support, resources, and tools provided to its members so that the industry can “walk the talk”.

Eric de Montgolfier, CEO, Invest Europe, commented:

• “Climate change is one of the greatest threats to the planet and its people and private equity can play a critical role in meeting this challenge.
• “Not only must our industry help tackle emissions, but it also has an opportunity to support new technologies that can lead to a greener, more sustainable world.”

Invest Europe published its second Climate Change Guide earlier this year, giving members guidance on integrating climate considerations into investment decisions and engaging with portfolio companies on climate change issues. Further guides are planned to give managers and investors more detailed and practical information in playing their part in a sustainable future.

To read our Climate Ambition Statement in full, please click here.

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The European Commission published today a series of proposals designed to implement the Capital Markets Union (CMU) Action Plan. Among these are the fund management reviews of the Alternative Investment Fund Managers Directive (AIFMD) and the European Long-Term Investment Fund (ELTIF) Regulation, as well as of the European Single Access Point (ESAP) Omnibus.

Today’s CMU proposals demonstrate the crucial role asset managers, such as private equity and venture capital managers, play in the financing of the European economy, by acting as bridge between investors and businesses. While investors committed more than €100 billion of capital in private equity in 2020, private equity backed companies represent more than €10 million employees.

Invest Europe, the association representing the European private equity industry, welcomes the targeted nature of the AIFMD review, which only focuses on areas related to delegation, loan-origination, and some reporting aspects of the Directive.

Martin Bresson, Director of Public Affairs at Invest Europe, commented: “The limited scope of the review is a clear confirmation that the current regulatory structure, which has withstood many crises since its inception, is to a very large extent appropriate. On this backdrop, we appreciate that the European Commission has taken the “if not broken – don’t mend” approach. That being said, there are a few blemishes that we will aim to assist the co-legislators in addressing as negotiations on the file will move forward”.

Next to the AIFMD, the revision of the ELTIF framework has the potential to drive new managers’ interest into this EU voluntary label which allows long-term AIF managers to market to retail clients. Amendments introduced to the proposal will make it easier for managers to set up ELTIF fund-of-funds and to market ELTIFs in a broader range of jurisdictions. Changes to the conflict of interest and diversification rules are also likely to increase the attractiveness of the regime.

“This CMU package of initiatives is by and large a step in the right direction,” says Martin Bresson. “Even on more controversial amendments, the private equity industry’s concerns and specificities have so far been taken into consideration. We can definitely see this as a recognition of the role our industry can – and will – play in the twin transitions Europe needs”.

Launching on 25^th November, ‘A Different Angle’ is an online branded film series exploring the role of private equity and venture capital in European society. This series, presented by Invest Europe, the world’s largest association of private capital providers, and produced by BBC StoryWorks Commercial Productions, brings to screen the human stories at the heart of the businesses that are driving change and fuelling growth through private capital.

Most people come into contact with a product or service from a company backed by private equity or venture capital every single day. Many of the brands we love, services we rely upon, and companies we work for benefit from private equity expertise and capital to enable them to flourish and meet our needs. Yet the industry’s contribution to jobs, innovation, funding better retirements, and driving positive societal change can be often overlooked or misunderstood.

A Different Angle aims to improve the understanding of private equity and venture capital, demystifying the virtuous circle of investing that supports our pensions and savings while exploring the true nature of innovation in Europe. It will also raise awareness about the expertise injected into businesses alongside capital, and how profit and purpose, such as high social and environmental goals, can work in harmony to produce better returns for investors and society.

Through powerful human stories, rather than a focus on mere data and figures, A Different Angle shines a light on the private equity industry and the businesses that are making a difference. The films within the series will explore the topics of pensions and savings, Environmental, Social, and Governance (ESG) criteria, employment and job creation, and Europe’s next unicorns. Crossing the continent, the films showcase a range of inspiring stories, from solutions for beekeepers to non-invasive healthcare headsets to combat a range of health issues.

Within the series, leaders like Coller Capital, Cinven, EQT, European Investment Fund, IQ Capital, and Mid-Europa Partners have contributed with their commitment and expertise to show how the companies they support innovate, create jobs, and improve our lives.

Simon Shelley, vice president of BBC StoryWorks Programme Partnerships, said: “Private equity and venture capital are ubiquitous but not often understood. This series seeks to demystify private equity and how it can generate positive returns not just for shareholders but for society as a whole. We’re thrilled to be working with Invest Europe to tell important stories from a variety of settings across Europe about job creation, responsible investing, and innovation.

Eric de Montgolfier, CEO of Invest Europe, commented: “Private equity and venture capital are deeply ingrained into the fabric of Europe. Across the continent, this industry is building better businesses that are helping support security in retirement for millions of pensioners, while fuelling innovation, creating jobs, and driving advances in sustainability. We are delighted BBC StoryWorks is producing these films for Invest Europe and bringing these stories to life.

You can explore the full series at www.bbc.com/storyworks/a-different-angle/home and https://www.investeurope.eu/about-private-equity/a-different-angle/ (U.K. viewers can only access the latter) and join the conversation online with #ADifferentAngle.

• Private equity invests €57bn in H1 2021, a new half-year record
• Over 95% of private equity firms intend to focus more on ESG in the near future

Invest Europe, the association representing Europe’s private equity, venture capital, and infrastructure sectors, as well as their investors, today published two reports underlining the robust recovery in private equity activity in the first half of 2021, as well as the strengthening belief in the industry’s ability to contribute to a stronger economy and better society.

‘Investing in Europe: Private Equity Activity H1 2021’ provides a detailed snapshot of private equity activity in Europe and reveals that firms invested €57.3 billion in businesses across Europe, the highest ever six-month total. The record was fueled by a strong rise in venture capital investment to €10.2 billion, a 58% increase on the previous six-month record registered in the second half of 2020. Growth investments also hit a new high, more than doubling to €17.5 billion, highlighting the industry’s focus on innovative, fast-growing businesses that are laying the groundwork for a better tomorrow.

The data shows strong first half fundraising of €52.4 billion, as long-term investors, such as insurers and pension funds, continue to target private equity in search of better returns for European savers. A record 365 funds completed fundraising during the first six months of the year, an all-time high for any H1 period. At the same time, divestment increased by 63% over the same period last year as firms successfully exited businesses via public market listings and competitive sales processes.

‘The insight: how Europe’s private equity industry is anchoring long-term investors – Pan-European market sentiment survey’, conducted and published in partnership with consultancy Arthur D. Little, reflects the momentum in private equity activity in the first half of the year and maps the role the industry is poised to play in the near term. Over two-thirds of fund managers see stronger investment opportunities in the coming year compared to the previous 12 months, and almost 60% of investors expect increased allocations to private equity over the coming three years.

As the outlook improves, the industry is concentrating ever more attention on delivering higher sustainability standards and more ethical practices. Some 95% of general partners stated they intend to increase their focus on Environmental, Social, and Governance (ESG) issues in the near future, and 86% are planning to concentrate more on diversity & inclusion. The survey also found that while COVID-19 had a negative impact on the funds of some four in ten managers, 83% of them responded that it also had a positive impact on their portfolio companies.

The theme of greater social and environmental responsibility runs throughout the survey, with 46% of investors expecting to increase allocations to impact funds over the coming 12 months.

Eric de Montgolfier, CEO of Invest Europe, commented: “Record investment levels and increased confidence in the outlook indicate that European private equity has adapted to the challenges of COVID-19 and is moving past the pandemic. At the same time, private equity is evolving as managers and investors focus even more attention on ESG, diversity and inclusion. This is an industry that recognises its role as a cornerstone of the European economy and wants to be at the forefront of the recovery, as well as the trends that matter to society.”

Invest Europe and ADL will be hosting a webinar on the survey from 1700 to 1730 CET on 17 November 2021. To register, please visit this page.

Both Invest Europe’s Private Equity H1 2021 report and Private Equity Sentiment Survey can be accessed here.

• European buy-outs delivered an IRR of 15.00%, beating MSCI Europe index return of 5.84%
• European VC returns an IRR of 16.79% over a 10-year horizon, close to that of North American funds

Invest Europe, the association representing Europe’s private equity, venture capital and infrastructure sectors, as well as their investors, today published two new reports demonstrating private equity’s long-term outperformance of public equities. The data shows that European buy-outs delivered an annualised net IRR of 15.00% since inception to end-2019, far ahead of the 5.84% achieved by the MSCI Europe, while growth investments and venture capital also clearly beat equities benchmarks.

The research comes from two Invest Europe publications: the first, ‘Benchmarking Public and Private Markets with the Public Market Equivalent (PME)’ compares a range of performance metrics to determine their relative strengths and weaknesses, while the second, ‘The Performance of European Private Equity Benchmark Report 2019’, records private equity performance over the last four decades.

With the publication of these reports, Invest Europe is putting private equity performance under a new lens, comparing like-with-like to create a transparent and fair account of private equity performance and its contribution to investors.

Eric de Montgolfier, CEO of Invest Europe, commented: “As the private equity industry has matured, it has become clear to fund managers and investors alike that traditional measures for comparing private equity investments with listed equities are perfectible. With the publication of these two reports, Invest Europe is demonstrating European private equity’s clear outperformance while supporting the drive to more consistent and robust performance metrics that can enable investors to compare assets more easily.”

Invest Europe’s report on benchmarking public and private markets investments analyses the different metrics available for measuring private equity fund performance. It identifies the strengths and weaknesses of the internal rate of return (IRR), multiple of invested capital (MOIC) and public market equivalent (PME).

The report identifies the modified public market equivalent (mPME), one of the second-generation PME metrics developed by investment advisory firm Cambridge Associates, as an additional and sophisticated tool for assessing private equity performance. mPME enables investors to take account of the effect of holding periods on investment performance and separate the intrinsic performance of the fund manager from the general evolution of markets. It also helps address the challenge of assessing the performance of active funds, that are conservatively valued during their lifetimes, against public equities.

Invest Europe’s performance report measures European private equity returns against relevant stock market indices, as well as private equity funds from North America and the rest of the world on a range of metrics.

The results show that for time horizons of 10 years and over, European buy-outs have routinely delivered an annualised IRR of between 15.00% and 15.50% net of fees, while mid-sized buy-outs generated the best returns of 16.65% over the long term and outperformed the MSCI Europe index by the widest margin.

European venture capital returned a net IRR of 16.79% over a 10-year horizon, performing on a par with North American funds over the same period, while the European growth capital private equity segment performed consistently strongly, generating an annualized IRR of 13.28%, outperforming the MSCI Europe which returned 7.32% over the same timescale.

• 90% of VC-backed European start-ups increase revenues, create jobs and deliver innovation
• First large-scale study of EU start-ups, covering 9,000 companies across all EU-28 Member States
  

Invest Europe has teamed up with the European Investment Fund (EIF), the EU’s leading venture capital (VC) investor, to release new research that highlights venture capital’s positive impact on fostering innovation, growth and job creation at start-ups across Europe.

The report entitled The VC Factor: Data-driven insights about VC-backed start-ups in Europe is the result of an ambitious research collaboration between the EIF and Invest Europe, the association representing venture capital, private equity and infrastructure sectors and their investors in Europe. The ground-breaking report tracked and analysed data on almost 9,000 young companies between 2007 and 2015, as well as some €35 billion of VC investment flows, offering new insights into Europe’s burgeoning start-up scene.

“We are delighted to have teamed up with Invest Europe for this data-driven project to analyse venture capital investment and its role as a catalyst for start-up success,” said Helmut Krämer-Eis, EIF’s Chief Economist. “Knowledge is power – and hence we are confident that the new report   increases the understanding of the European VC ecosystem and delivers further proof of the positive impact of venture capital on start-ups.”

“We are thrilled to have worked with the EIF on The VC Factor,” said Invest Europe CEO Eric de Montgolfier. “The research shows that the benefit of venture capital funding for the vast majority of companies is substantial. Receiving VC investment enables them to unleash their full potential, growing further and faster than their peers while also creating new innovations and empowering investors into European VC as an asset class.”

The report acknowledges that not all VC-backed start-ups survive, nor do they always perform as their founders dream. However, over a third of start-ups studied were high performers, generating strong revenue growth, creating significant numbers of jobs and spurring innovation.

Key findings include:

• One in five start-ups were classified as “all-rounders”, generating 141% revenue growth on average and a 54% increase in employee numbers over four years.
• 7% of start-ups were classified as “visionaries”, performing strongly on intellectual property with intangible assets such as patents up by 534%.
• 8% were classified as “superstars”, outperforming on all fronts with revenues growing 358%, intangibles by 340% and staff by 109%.

The VC Factor compared start-ups with VC backing to those without in order to determine the impact of venture investment and expertise. It found that without VC investment, start-up performance would have been significantly poorer across all profiles, while the number of “laggards” that shrink in size would have increased more than threefold. In addition, almost half of high-growth start-ups would have either fallen into a much less successful profile or defaulted in the absence of VC.

The report also made new discoveries about the locations of VC investments. The six largest VC hubs in Europe received one third of all investment activity, led by Ile-de-France, inner London and Berlin. Meanwhile, Nordic start-ups – centred around the fourth-largest hub Stockholm – were the most innovative in terms of new patents and intangible assets. At the same time, emerging start-up hubs are shaking the status quo with 25% of capital deployed into cities with fewer than 100,000 inhabitants.

To read The VC Factor report in full, please click here.

NOTES TO EDITORS

The study highlights successful start-ups such as InFarm, the Berlin-based vertical farming group which is aiming to reduce food miles, Dutch Solynta, a developer of potato seeds that are designed to help developing world growers by being less bulky and perishable than tubers, and Inkitt, a book publishing platform that wants to give aspiring authors a fair chance of success.

 

• De Montgolfier joins from European investment firm Gimv where he led French operations
• Brings over 30 years’ experience as private equity investment professional to CEO role

Invest Europe has appointed Eric de Montgolfier as new CEO to lead the world’s largest association of private capital providers and investors.

De Montgolfier will take the helm at Invest Europe, the association representing Europe’s private equity, venture capital, infrastructure sectors, as well as their investors by the end of December. A highly-experienced private equity professional, de Montgolfier joins from Brussels-listed investment manager Gimv, where he was Partner and Head of Gimv France, responsible for overseeing investment and group strategy in the market. 

“It is a great honour to be joining Invest Europe as CEO,” de Montgolfier said. “I have enormous respect for the work of the association and its team in Brussels. I look forward to bringing the experience I have gained in over 30 years at private equity firms in Europe to help promote better understanding of the industry and build a better operating environment for our members.”

De Montgolfier succeeds Michael Collins who stepped down as CEO in August after six years with Invest Europe. He joins during an important period for the association as it steps up engagement with new and re-elected policymakers who will set the regulatory agenda for the European Union over the next five years. Invest Europe recently published its Manifesto for 2019-2024, outlining the industry’s key policy priorities for the new European Parliamentary term.

“I am delighted to welcome Eric as the next CEO of Invest Europe,” said Thierry Baudon, Invest Europe Chair. “He is an exceptionally experienced and talented private equity professional who understands the challenges and opportunities the private equity industry faces in Europe today. I look forward to working with Eric and the Invest Europe team to deliver more successes on behalf of all our members.”

Among Invest Europe’s achievements during the last European Parliament was the creation of the VentureEU fund of funds programme, which aims to raise €2.1 billion for investment in dynamic start-ups across the continent. The association also worked on the development of a new long-term equities category under Solvency II, which places a lower capital requirement on private equity and venture capital investments for insurers, and established Invest Week to promote the benefits of private equity and venture capital investment in Europe.

De Montgolfier joined Gimv, the Euronext-listed investment group, as head of its French office in 2015, becoming CEO of Gimv France the following year. During his tenure, he oversaw the repositioning and growth of the mid-market specialist’s operations in France. The move increased the firm’s visibility and deal flow, and resulted in €270 million invested across ten transactions.

Prior to joining Gimv, de Montgolfier spent 11 years as co-founding Managing Partner and COO at Edmond de Rothschild Capital Partners, building a respected name in the French lower mid-market. Before that, he rose through the ranks at French firm Astorg, becoming a founding partner in 1998 when the firm spun off from Suez Group.

De Montgolfier holds a Masters in Management from ESCP Europe (Paris). He has been a Mid-Market Platform Council member of Invest Europe.