Private capital fund returns over the 2006-2022 period reached 11.3% net Internal Rate of Return (IRR), an increase of 0.1% compared to the previous edition's study. As for the Multiple on Invested Capital (MICP), a minimal drop from 1.6x to 1.5x is observed. This small decrease is attributed to the inclusion of new funds in the sample, which correspond to more recent vintages, with an average holding period of 2.7 years, approximately one year less on average compared to the previous edition's participants. These are some of the most relevant data from the second Study on the Profitability of Private Capital in Spain 2022, prepared jointly by the Strategy and Transactions area of EY and SpainCap, and with the support of Webcapitalriesgo. This analysis, consolidated as one of the most participative, with 48% coverage of all Spanish private capital fund managers, reveals comparative data on the performance of Spanish private capital and other financial market indices.
In terms of annual returns, the report reveals that private capital outperforms the IBEX 35 index by four times and outperforms the Euro Stoxx 600 index by more than 70%, demonstrating the strength and consistency of the sector. In addition, the spread of private capital over the Spanish 10-year bond is over 8%, representing a solid premium to equity alternatives. Compared to real estate returns, private capital more than doubles its return. These yields have been calculated based on an analysis of Spanish private capital funds created between 2006 and 2020, as the analysis includes only those funds with at least two years of history. This represents 48% of the population and more than 60% of equity inflows over the period (an increase of 41% compared to 2021). Approximately, 75% of these funds belong to the private equity category, while the remaining 25% are venture capital funds.
Analysing returns by fund type, venture capital funds show higher returns (12.8%) compared to the sector average (11.3%). On the other hand, private equity funds recorded double-digit returns (11%), with a weight of realised distributions of 50%, indicating a lower dependence on the future materialization of latent distributions, according to the report. As for the so-called "article 8" and "article 9" funds, a new analysis added to the study this year, their net IRR is 14.3%, 3% higher than that of the total funds analysed.
Juan López del Alcázar, Managing Partner of EY's Strategy and Transactions practice, says: "This year's report confirms and reinforces the conclusions of the first edition regarding the performance of private capital in Spain and also gains in depth. On the one hand, we have increased participation with the incorporation of new managers and funds, and, on the other hand, we have introduced new analyses such as the segmentation of funds according to their ESG policies. The rigour and consistency of the study, in only two years of life, place it at the level of the best reports in the sector in Europe. We hope that this work will be, above all, useful for investors and managers and that it will help to better understand the present and future of this type of investment in our country".
For his part, the president of SpainCap, Oriol Pinya, adds: "Transparency is a fundamental pillar of SpainCap. The study on the profitability of Private Capital in Spain that we have presented today shows that private capital in Spain consistently generates double-digit annual returns over a period of more than fifteen years, both in private equity and venture capital, generating alpha vs. comparable public markets. We believe that our contribution to the economy is increasingly important in terms of profitability, innovation, and employment, as explained in this report and in the studies that the Association has been publishing for years; and we thank both the Administration and the other public and private agents and investors for their unconditional support to highlight the value of our activity and our valuable contribution to the real economy".
About EY
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About SpainCap
SpainCap represents the Venture Capital & Private Equity industry in Spain. Chaired by Oriol Pinya, it brings together more than 170 national and international Venture Capital & Private Equity firms, 96 service providers and 20 institutional investors. SPAINCAP is the association that brings together Venture Capital & Private Equity entities in Spain, as well as their investors, including insurance companies and pension funds. SPAINCAP members invest in medium and long term in unlisted companies, from startups to established companies, providing not only stable funding through equity, but also innovation and management support. The mission of the association is to connect all industry players in Spain, representing their interests before the Administration, the media and public opinion, both nationally and internationally, through alliances and synergies in Europe and Latin America.
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