Spanish private equity and venture capital funds show a great capacity for resilience and adaptation in a global environment of economic uncertainty. This is what is deduced from the Study on the Profitability of Private Capital in Spain 2023, prepared jointly by the Strategy and Transactions area of EY and SpainCap, and with the support of Webcapitalriesgo.
The profitability in terms of net Internal Rate of Return (IRR) for private equity funds stood at 11.2% in 2023, in line with the previous year (11.3%). The Invested Capital Multiple (TVPI) grew from 1.5x to 1.6x, consolidating the creation of value for investors. Between the years 2022 and 2023, an improvement of 0.5% has also been observed in Private Equity funds, which contrasts with the drop in the profitability of Venture Capital funds, up to 10% at the double-digit limit. This trend is associated with factors such as the lower liquidity of the investment market in companies in early stages, the impact of interest rates on the valuation of companies whose cash flows are further away in time and the base effect as the mature industry.
If we look at the typology of the funds, those classified under articles 8 and 9 of the Sustainable Finance Disclosure Regulation (SFDR), focused on ESG criteria, continue to increase their profitability differential, now reaching 14.6%, which represents three percentage points more than the sector average and a growth of 0.3% compared to its results from the previous year.
Compared to investments in other assets, Spanish private capital continues to beat its profitability: it improves by more than double that of the IBEX 35 and by 50% that of the Euro Stoxx 600. The yield is also much higher than that of the 10-year Spanish bond, with a differential greater than 8%, and the real estate profitability, which almost doubles in terms of return.
Between 2006 and 2023, the value of private equity assets under management has increased by 1.8 times its value to reach almost €14.7 billion in 2023. This trend reflects the sustained interest and confidence of investors in the Spanish private capital market, highlighting its ability to attract and manage investments efficiently over time.
In this edition of the study, the sample has increased, collecting data from 52 managers and 158 Spanish private equity funds, which represents approximately 47% of the population and 64% of the total capital contributions during the period 2006- 2021 (10,670 million euros in total).
Juan López del Alcázar, managing partner of the Strategy and Transactions area at EY, states regarding the report that “this edition, which includes data for the year 2023, continues the series started in 2006 and offers a deeper and more precise vision of the sector. This year, we have managed to increase participation again, with 52 managers collaborating in the study, which represents an increase of 11% compared to the previous year. This increase in participation reflects the growing confidence of the managers in this. transparency initiative, whose implementation has not been easy but which is now consolidated as a reference in the sector.”
For her part, the president of SpainCap, Elena Rico, highlights that, “as a sector committed to sustainable investment, our objective is, in addition to providing profitability to investors, to create employment and wealth for the economy. Positive returns that we have been demonstrating for years and which, as this report shows, generates double-digit net returns in Venture Capital and Private Equity. Continuing with the exercise of transparency in our industry, which currently generates more than half a million jobs in both companies. management companies as well as in their investee companies, “We have full confidence that we will continue creating value and innovation for the Spanish industrial fabric and promoting more global businesses that can compete in other markets.”
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