EUROPE - Pension fund commitments to private equity funds were last year almost wiped out in the wake of the financial crisis, according to analysis of investment and performance data.

Examining the state of the private equity funds in 2009, the European Private Equity and Venture Capital Association (EVCA) found that commitments from pension funds fell by over 90% last year, to less than fund-of-fund commitments or from banks, which saw a 88% and 53% drop respectively.

Private equity funds were only able to raise €12.5bn in new investments in 2009, down dramatically from 2008 and 2007, when investors were persuaded to part worth over €80bn per annum. And pension fund commitments fell by 94%, from €22.6bn to only €1.3bn.

As well as the drop in commitments, 2009 also saw a large increase in write-offs, from €870m to over €3bn in one year  - something Javier Echarri, secretary general of the EVCA, said demonstrated "the seriousness of the wider economic situation".

Perhaps unsurprisingly, the total amount of new equity invested in 2009 was also significantly lower than previous years, and amounted to €21bn or 61% of that raised in 2007.

Despite this reduced interest from investors, private equity funds invested in over 4,000 companies in all of Europe, and the amount of cash moving into growth capital investments rose by almost a quarter.

And while there were only three buyout deals exceeding €1bn over the course of the year, two of these had occurred in the fourth quarter of 2009.

That said, it was not all good news as 2009 also saw a large increase in the number of turnaround investments, up by 83%.

Echarri did find some positives to highlight, as he noted approximately 50% of the companies invested in were start-ups, but cautioned it had not been an easy year.

"The increase in write-offs, albeit from a low base, shows the seriousness of the wider economic situation," said Echarri.

The EVCA noted there was a net internal rate of return (IRR) of 8.8% for private equity overall while buyout funds returned 11.8% in 2009, roughly a 1% drop over the previous year.

If you have any comments you would like to add to this or any other story, contact Julie Henderson on + 44 (0)20 7261 4602 or email julie.henderson@ipe.com

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