Spanish private capital funds launched between 2006 and 2019 show a net internal rate of return (IRR) of 11.2% and a multiple of invested capital (“MOIC”) of 1.6x. This is one of the main conclusions of the first report on the Profitability of Private Equity Funds in Spain 2021, produced by SpainCap and the Strategy and Transactions department of EY in Spain. This aggregate data, which considers a 15-year time span, shows the ability of Spanish funds to generate consistent returns. These returns have been calculated based on a sample of 87 funds with a total of €6.37bn in contributions.
Oriol Pinya, President of SpainCap: "This study aims to provide transparency to the Venture Capital & Private Equity industry in Spain, another example of our firm commitment to invest capital for a sustainable future".
The report shows that Venture Capital funds have above-average returns (17.3%). While Private Equity funds show double-digit returns (10.2%), but with a higher weight of realized distributions, which means a lower dependence on the future materialization of latent distributions compared to Venture Capital funds.
In this sense, both fund types show the majority of allocated capital in the top-performing quartiles, which indicates an adequate selection of the most profitable funds by investors. This is possible due to the track record of many of the firms in the sector, the transparency promoted in recent years and the professionalization of investors.
A clear increase in profitability derived from the positive impact on the investment cycle of economic growth can be seen when the funds are grouped into periods according to their vintage years: pre-financial crisis (2006-2008), financial crisis (2009-2013) and recovery (2014-2019). According to the study, funds invested before 2009 were adversely affected by the need to make most of the disinvestments in complex times for the economy, while the most recently created funds (recovery stage) show rates of return of 19.1%.
Beyond the returns obtained, the evolution of the number of funds created and contributions during the three periods analyzed shows the growing strength of private capital in the period considered. Contributions during the recovery period represent approximately 70% of the total. In addition, the analysis shows how, during the crisis years, contributions were very low due to the difficulties of the Spanish economic context and the lack of liquidity.
According to José Zudaire, managing director of SpainCap: "Private Capital's important contribution to the real economy has been demonstrated, generating high profitability while creating employment in a sustained manner over time".
Results show that Spanish private capital consistently outperforms other asset classes considered as alternatives and represented by their respective indexes. In other words, Spanish private capital outperforms the Ibex 35 index threefold over the period considered and outperforms the Euro Stoxx 600 by more than 35%. Likewise, the spread of private capital over the Spanish 10-year bond exceeds 8%, representing a robust premium over equity alternatives. Compared to real estate yields, the return on private equity is more than double that of real estate.
“This study makes the private capital sector in Spain more transparent, bringing us in line with the most advanced practices in other comparable countries," said Juan López del Alcázar, partner in charge of the Private Capital sector and Managing Partner of Strategy and Transactions at EY. “In addition, we are sure that it will contribute in a very positive towards the fundraising of Spanish GPs, not only because of the results shown, but also because it will provide information to a universe of potential investors less familiar with this type of assets".
For the full report, visit: ey.com/private-equity/ey-inf-fondos-capital-privado y https://spaincap.org/estadisticas-publicaciones/publicaciones/
About the Private Capital Funds in Spain 2021 Performance Report
The main objective of the report is to analyze the performance of private capital in Spain from an empirical perspective in order to shed light on the sector by putting its performance in context.
The target population of the study is made up of the funds of limited life investment vehicles raised by privately owned Spanish fund managers since 2006. The sample considered in the study consists of the funds of 40 Spanish private capital managers, representing approximately 45% of the population and 57% of total capital contributions during the period 2006 - 2019 (€6.37bn). The analysis includes only those funds that have at least two years of history at the reference date of the report (2021), thus eliminating the depressing effect created by recent funds in a stabilization period, commonly referred to as the "J-curve".
The performance data have been expressed in terms of net IRR and MOIC to make them comparable with other studies in our environment and following the recommendations of the "Guide to integrated reporting for private capital firms in Spain" published by SpainCap and EY.
About SpainCap
SPAINCAP represents the Private Equity industry in Spain. Chaired by Oriol Pinya, it brings together more than 170 national and international Venture Capital & Private Equity firms, 90 service providers and 17 institutional investors. SPAINCAP members invest in medium and long term in unlisted companies, from startups to established companies, providing not only stable financing through equity, but also innovation and management support. The Association's mission is to connect all industry players in Spain, representing their interests before the Administration, media and public opinion, both nationally and internationally, through alliances and synergies in Europe and Latin America.
About EY
EY is a global leader in audit, tax, transaction advisory and consulting services. The quality analysis and services we provide help build confidence in capital markets and economies around the world. We develop outstanding leaders who work as a team to deliver on our commitments to our stakeholders. In doing so, we play an essential role in creating a better working world for our employees, our clients and society.
EY refers to the international organization and may refer to one or more of the Ernst & Young Global Limited companies, each of which is a separate legal entity. Ernst & Young Global Limited is a UK company limited by guarantee and does not provide services to clients. For more information about our organization, please visit ey.com.
cloud technology axon
tuTECHÔ, empresa social que lucha contra el sinhogarismo en España, ...
