EVCA forecasts global outlook for private equity

A report by the European Private Equity & Venture Capital Association (EVCA), Global Scenarios for Private Equity and Venture Capital, presents potential scenarios for global economic development over the coming decade and the impact these will have on the private equity industry.

The first of its kind, the study was conducted by Oxford Analytica and provides a tool for GPs to plan fund strategies. A horizon of 2020 was chosen and the study presents four scenarios, integrating industry-specific developments with macro-economic, political and social trends, and drivers.

The first scenario, 'Three Towers', suggests global economic integration will retreat into three large regional blocs within which trade and investment flows are relatively unhindered. It is suggested that in this scenario private equity performance will continue to outperform public equities.

The second, 'Gulfstream', looks at a world that enhances the liberal economic model. Here, trade and investment flows continue to grow, but are concentrated among wealthy nations and larger emerging markets. Private equity will play an important role in this scenario with cross-border M&A and declining protectionism driving industry concentration on a global scale. Venture capital will thrive in an environment that will encourage innovation.

'Trading Up', sees global economic integration progressing with strong institutional support. The multilateral trading system will prosper and remain key for economic integration. Venture capital will perform well in Europe, where government funding will play a vital role in financing R&D.

The final scenario, 'Going East', suggests China will prove increasingly successful at developing cutting-edge technologies. India will also develop into a global leader in IT and Indian companies will move towards developing cutting edge software and web services. This means venture capital activity will shift to Asia and European policymakers will favour public equity markets.

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