Research by law firm Mourant Ozannes suggests that the EU’s private equity market will fare worse than in the UK once Brexit has taken place.
The research sought out the views of more than 260 limited and general partners worldwide through July and August, and it found expectations of an increase in institutional investment based in the UK, compared to the remaining EU. In part at least, these hopes were pinned on expectations of relief from the EU’s AIFMD regime.
“Almost 100% of respondents told us AIFMD has made raising funds from EU-based investors more challenging,” said Ben Robins (pictured), Jersey based funds partner at Mourant Ozannes.
“Couple this with survey results revealing that limited and general partners expect Brexit to result in greater investment from UK-based investors and declining investment from Europe, and it’s clear that UK private equity fundraising will become easier in the post Brexit environment, whilst European fundraising will remain challenging.”
Generally, the private equity market has been hit by a delay to fund launches following the Brexit vote. According to the survey, some 695 of UK GPs and 50% of EU (ex-UK) GPs deferred fund launches after the vote.
That said, some 88% of those surveyed were positive about the outlook over the coming year – 93% among those based in the UK. A whopping 96% of GPs said they had found it more challenging to raise funds from EU investors since the introduction of AFIMD.
Another key finding is that some 17% of GPs based in the EU are considering changing the jurisdiction of fund launches, because of uncertainty around regulation and tax. Among UK GPs this is higher at 41%. Overall, 47% of UK GPs and 39% of European (ex-UK) GPs said their confidence in the UK regulatory environment had fallen since the Brexit vote.
Robins added that this uncertainty was given impetus by the ongoing uncertainty around what the UK’s separation from the EU will actually look like following the triggering of Article 50.
“We expect this to continue to weigh on transactional activity, especially institutional-backed deal flow.”