2013 was a year of mixed fortunes for the listed private equity sector. Some funds did exceptionally well but others, particularly those exposed to emerging markets saw falling NAVs and widening discounts.

The recovery in 3i : III ‘s share price following the disclosure of Sherborne’s stake building in the fund pushed it close to the top of the leaderboard for gains in share price (up 83.5% on the year) but it was beaten into third place by minnow, Avanti Capital : AVA whose share price rose by 114% as its largest investment, Eclectic Bars : BAR, was admitted to trading on AIM, and, Euronext listed, AP Alternative Investments : AAA.AM whose shares rose by 87% as its main investment, Athene Life Re, rose in value and its discount narrowed.

Ignoring a few very tiny funds, the biggest gain in net asset value was recorded by SVG Capital : SVI, up 30% as it sold SVG Advisers to Aberdeen Asset Management, and Permira sold a substantial chunk of its holding in Pro Sieben Sat, recapitalised its investment in Hugo Boss and sold its investment in Marazzi tiles. SVG has been buying back shares aggressively.

On the down side, some emerging market funds disappointed in share price terms. Reconstruction Capital II : RC2, the Romanian fund, fell by over 60%, two Indian funds, Elephant Capital : ECAP and Kubera Cross-Border : KUBC, fell by 48% and 34% respectively, Chinese commodity play, Origo partners : OPP, fell by 45% and Tau Capital : TAU, the Kazakh fund, fell by 40%. The falls reflected a wider malaise in emerging markets with weak currencies, stuttering growth and falling commodity prices dragging down valuations.

Overall the sector continued to shrink as funds forced into a realisation strategy following the problems of the credit crunch continued to sell investments and return capital. The one bright spark was Better Capital : BCAP ’s raising of £182m through placing and open offer in August. This money was used to expand Better Capital’s 2012 cell rather than create a new 2013 cell. Better Capital are yet to announce that this money has been deployed in new investments but progress may have been hampered by their failure to secure a deal with Albermarle & Bond.

2013 was a year when the IPO market really started to open up, as an example the US IPO market was more than 40% bigger than 2012 with more companies listing than in any year since 2000. High profile issues like Twitter : TWTR.US featured in some fund’s portfolios – notably Private Equity Investor : PEQ. Thomson Reuters and NVCA say 2013 was the best year for venture backed IPOs since 2007 in the US with biotech particularly in vogue. Globally EY reckon there were 864 IPOs in 2013 raising $163bn. Signs are, so far, that this buoyant market for disposals by private equity companies will continue into 2014. According to EY Global IPO Trends 2014 could be a record year for IPOs – they are expecting technology, real estate and financial sectors to dominate.

Refinancing debt seem to have become a bit easier in 2013 as well. Improved liquidity and increased competition amongst banks aided this. M&A activity was subdued however with less deals (by value) than in any year since 2009. EY are looking for an uptick in 2014 as companies finally start to spend some of their enormous cash reserves.