OREANDA-NEWS. The optimism on the German private equity market declined somewhat in the second quarter of 2013. The German Private Equity Barometer dropped by 3.7 points to close at 36.5 points. The business climate index calculated by the BVK and KfW is thus now only slightly higher than the long-term average (36.1 points). The significant decline in sentiment among early stage investors pushed the indicator into negative territory. In contrast, investors again expressed rather more optimism in the later phase segment.

The mood of early stage investors cooled sharply in the second quarter (-16.9 points) to 28.6 points. This figure is significantly below the long-term average (37.7 points). Conversely, the mood of later stage investors is more positive than in the previous quarter (+5.4 points to 43.3 points). Falling demand for venture capital is the main reason for the decline in sentiment in the early stage segment. The optimism in the later stage segment can be attributed to increased merger and acquisition activity.

The survey participants assessed both the fundraising situation and exit possibilities as being far better than in the previous quarter. That said, the recent negative assessments of start-up and innovation activity are having a dampening effect on sentiment in the private equity market. The diminishing confidence of early stage investors is mainly reflected in the business expectations for the coming six months (-6.1 points). In contrast, the current business situation is only judged as being slightly worse (-1.2 points), because here the negative assessments in the early stage segment are offset by the business situation of later stage investors, which remains good.

BVK Managing Director Ulrike Hinrichs commented on the mixed sentiment in the private equity market: “The mood upswing in the late stage is welcome and also very closely related to the robust economic situation in Germany. The positive outlook gives reason to hope for a successful second half of the year with a lively investment business. The critical mood in the early stage segment should not hide the fact that venture capital remains of key importance for innovation financing. We are convinced that the German venture capital market will regain its optimism. Politicians can also contribute to this by finally establishing conditions enabling venture capital in this country to play its role as a driving force, so that the potential of young and innovative companies is used to boost the prosperity of our country”.

Dr Jorg Zeuner, Chief Economist of the KfW Group, is of two minds about the development in the private equity market: “We have mixed feelings about the current development of the market. The upward trend in the later phase is certainly welcome, but the comparatively sharp decline in the early stage segment is a warning signal that the willingness to invest and innovate among companies is also suffering under the uncertain conditions. It is becoming increasingly difficult for venture capital investors”.