Venture capital or private equity funds remain the most profitable investment product. A 2022 report by EY in collaboration with the industry group SpainCap and Webcapitalriesgo shows that net IRR for these vehicles stayed at 11.3 percent, just a touch above 11.2 percent in 2021.
The profits from these funds exceed those of other market assets by a wide margin. They delivered roughly triple the annual net return of the Ibex-35 index, which averaged 2.8 percent between 2006 and 2022. The Ibex-35 still trails the Euro Stoxx 600 index, which posted a 6.5 percent return in the same period, underscoring how private markets have outperformed many traditional benchmarks.
Beyond indices, private equity returns far surpass other investment products such as fixed income, hedge funds, or real estate. The study shows that the annual return on a 10-year Spanish government bond was about 2.9 percent, while venture funds yielded around 3.4 percent and more illiquid assets like bricks-and-mortar opportunities around 5.6 percent.
Returns up to 30 percent
When funds are analyzed by quarterly performance, the second half of the year has frequently offered the strongest returns. Six out of every ten euros are invested in private equity, recording gains ranging from 14 percent up to almost 32 percent. In contrast, roughly 17 percent of capital invested faced a loss, with an average drawdown near 8.4 percent.
Breaking down investments by strategy, private equity and venture capital show different profiles. Private equity tends to deliver lower returns when focused on smaller or highly consolidated companies, posting around 11 percent, while venture capital sits around 12.8 percent. Compared with 2021, private equity improved while venture capital faced a slight dip. The shift in monetary policy, including rising interest rates, has weighed more on newer and growth-stage firms than on established market players.
In the second edition of the study, EY and SpainCap also examined funds that include environmental, social, and governance criteria. Impact funds were identified as a distinct group, with a total of 14 vehicles and assets projected to reach 1,552 million euros by the end of 2022. These funds achieved a net profitability of 14 percent, notably lifting the market average.
Fourteen funds that reached the end of their life since 2006 delivered an annual net return of 5.9 percent. While this is lower than the 2022 performance, these funds faced a challenging macroeconomic context. The report notes that closed-end funds often outperform many other investment options analyzed, despite the tougher environment.
Investment in private equity breaks a historical record
Private equity managers in Spain surpassed the milestone of one hundred firms for the first time. They invested 14.984 billion euros in assets, the highest figure on record. The partnership behind the study highlighted that the total assets under management rose by roughly 10 percent in the prior year, signaling sustained confidence in these assets across the market.
The authors of the report emphasize a sense of market momentum and the growing scale of private equity activity as a sign of continued traction within the sector. The figures reflect a robust appetite for private equity and venture capital as part of diversified investment portfolios, supported by a favorable but evolving market landscape.
Pre-pandemic operations recovered in 2022, with 594 completed deals worth 1,686 million euros. In comparison, there were 553 transactions and 1,350 million in 2021. In liquidation scenarios, 216 transactions were recorded in 2022, a rise of 45 versus the prior year, though the overall value was about 200 million euros below 2021, approaching 600 million euros.
An investment in private equity accounts for around 0.7 percent of GDP. This share has more than doubled since 2006, when it stood at 0.3 percent. In Spain, the private equity sector’s impact on GDP sits just above the European Union average of 0.63 percent, underscoring its growing importance to the national economy.
Notes: The report draws on data from private equity managers and related market participants, reflecting a broad set of sources and industry observations for the 2022 period. The figures are subject to revision as additional data becomes available and are intended to illustrate trends within the sector rather than provide investment advice.