Venture Cap Investment Deals on the Rise

A new report shows the amount of money invested by venture capital firms was up 19% from 2009, with the number of deals 12% higher than 2008.

(January 24, 2011) — According to the MoneyTree Report by PricewaterhouseCoopers and the National Venture Capital Association (NVCA), venture capital firms invested $21.8 billion in 3,277 deals in 2010, representing an increase of 19% from 2009.

“The venture capital community found itself in a better position at the end of 2010,” said Mark Heesen, president of the NVCA, in a release. “We were clearly in recovery mode with investment levels reflecting the economic reality of our business,” he said, adding that additional investment across sectors highlighted those areas where the greatest opportunities lie, particularly within the Internet, software and clean technology industries. “The year’s increase in first time deals and early stage investment is encouraging as this trend suggests that the venture community is doing more with less. We hope this continues in 2011.”

The rise in venture investments in 2010 represented the first time the annual investment level has increased since 2007, according to the report.

The findings contrast slightly with an earlier report from last year by Cambridge Associates and the NVCA that showed venture capital 10-year returns — considered the most important measurement of the industry — were negative 3.7% for the period ending March 31, 2010. The report showed that despite slight improvement in initial public offerings and mergers and acquisitions, the venture capital industry is still shaky, which could cause difficulties for venture firms seeking to raise more capital in 2011 or 2012.

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Peter Mooradian of Cambridge Associates, however, had said he believes the 10-year returns may have bottomed out, indicating his faith in bright news ahead.

“We continue to see a decline in the 10-year return number but believe it will bottom-out in the mid-negative single digits over the next two quarters,” Mooradian said in a release. “Sustained improvement in the exit markets should result in the figure returning to break-even or modestly positive territory in the second half of 2011.”



To contact the <em>aiCIO</em> editor of this story: Paula Vasan at <a href='mailto:pvasan@assetinternational.com'>pvasan@assetinternational.com</a>; 646-308-2742

Pensions Champion Emerging Market Debt

A new survey by Pensions Week has shown that emerging debt has trumped developed debt.

(January 24, 2011) — Pensions have reported favoring emerging market debt over developed market debt, accreting to a survey by Pensions Week of investment consultants.

According to the survey’s respondents, which included Towers Watson, Mercer, JLT, and Aon Hewitt, eight out of 13 leading EM debt fund managers say they expect 7-9% returns across the asset class in 2011.

While Russia was believed to be the biggest country allocation in four of the funds surveyed, three others favor South Africa and Mexico, and two more go for Brazil, the Financial Times reported. “We have a large weighting in Russia 2030 bonds, which tend to be a highly liquid proxy for the overall market,” Damien Buchet, head of emerging market fixed income at Axa Investment Managers, told the FT.

With emerging markets set for further heavy inflows of investment, fund managers have expressed continued confidence in emerging markets as a top 2011 bet, fueled by double-digit returns, rising incomes, and rapid economic growth. According to the Institute for International Finance (IIF), equity portfolio flows to emerging markets are set to reach $186 billion this year and will be more than double the $62 billion annual average seen between 2005 and 2009. The findings by Pensions Week support earlier findings from a survey by Deutsche Bank, which pointed to a continued desire to focus on emerging markets and alternative strategies, such as long-short equity, macro funds and special situations, as opposed to US equity.

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The report — compiled late last year by Deutsche Bank Pension Strategies & Solutions — discovered that hedge funds have emerged as one of the most popular areas for future investment, particularly among public and corporate defined benefit plans. While 46% of respondents anticipate increases to emerging markets and 41% for hedge funds over the next 12 months, 44% said they would like to decrease their exposure to US large-cap equities. Meanwhile, 38% said they would like to reduce exposure to small-cap equities.



To contact the <em>aiCIO</em> editor of this story: Paula Vasan at <a href='mailto:pvasan@assetinternational.com'>pvasan@assetinternational.com</a>; 646-308-2742

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