EVCA looks into future for global private equity

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

The report, the first study of its kind for the private equity industry, was conducted by Oxford Analytica and is meant as a tool for GPs to plan their fund strategies. Oxford Analytica chose a horizon of 2020 and the study presents four global scenarios, each integrating industry-specific developments with macro-economic, political and social trends and drivers.

The first scenario, 'Three Towers', suggests that global economic integration will retreat into three large regional blocs within which trade and investment flows are relatively unhindered. The study suggests 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 market countries. 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.

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

The last scenario, 'Going East', suggests that China will prove increasingly successful at developing cutting-edge technologies. India will also develop into a global leader in information technology 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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