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Banking

Private equity: Room for more improvement

EBRD’s chief economist urges great investor participation.

Central and eastern Europe’s private equity market needs greater participation from long-term institutional investors if it is to reach its full potential, says a senior economist.

Erik Berglof, chief economist at the European Bank for Reconstruction and Development, says that if private pension funds and insurance companies were to invest more in private equity funds the industry would be given a big boost. One concern in particular is the lack of domestic investors, he adds.

“Private equity will become more important in the region but there are very few domestic players,” he tells Euromoney. This lack of domestic investment remains a crucial obstacle to the development of a sustainable, mature private equity market in the region, he adds. Berglof reckons one way local funds could be encouraged would be if regulatory constraints were relaxed.

Last year, the volume of finance committed to private equity in the region reached more than $1.6 billion compared with $1.4 billion in 2004. That was the first time that fund flows in the region had topped the $1 billion mark and is a stark contrast with the situation following Russia’s financial crisis in 1998. As the region continues to develop, so should its private equity market.

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