OREANDA-NEWS. The German Private Equity Barometer, which is calculated by KfW and the German Private Equity and Venture Capital Association (BVK), fell again in the third quarter, marking the second consecutive decline in sentiment among German private equity firms. The main indicator - business climate - is now around halfway between historic highs and lows at 31.5 points (down 5.0). The main reason for the latest fall was a substantial decline in sentiment among late-stage investors. The late-stage indicator dropped 9.6 points, while the index for the early-stage segment stagnated (up 1.1 points).

One key factor weighing on sentiment in the German private equity market is the fundraising environment, which was again perceived to be highly unfavourable. The tapering discussion in the US prompted fears of higher borrowing rates among private equity investors, all of which will have had an adverse impact.

Both early-stage and late-stage investors were fairly pessimistic about business expectations over the next six months. The indicators were down 4.4 and 4.5 points respectively, indicating that German private equity market sentiment is unlikely to improve in the near future.

Dr Jorg Zeuner, the Chief Economist of the KfW Group, believes that the German private equity market is still in flux: “We have seen constant but modest falls and rises in the business climate for two years now. Despite the positive economic situation, low interest rates and continued high demand for investment capital, we have yet to see any real recovery. I hope that positive exits will boost private equity investors' confidence in the market over the remainder of the year.”

BVK's Managing Director Ulrike Hinrichs commented: “In the short term, developments in fundraising will be crucial for sentiment and the state of the market in both the early and late stages. We are confident that a number of new funds will emerge this year and in early 2014. This, combined with a healthier economy, should boost market sentiment. It also remains to be seen what measures the new German government will announce that could further stimulate the German private equity market.”