Private equity: Central Europe comes into focus

As manager of Austria’s largest private equity fund of funds, Erste Asset Management is launching the follow-on fund “Erste Diversified Private Equity II,” thereby further expanding its successful private markets strategy. We spoke with Thomas Bobek, Head of Private Markets, about the launch of the new fund of funds and the investment approach.

EAM Communications: Mr. Bobek, Erste Asset Management is launching a new private equity fund of funds, “Erste Diversified Private Equity II.” What is behind this move?

Thomas Bobek: We are continuing our successful private markets strategy. Following the very positive feedback to our first fund of funds, we are again approaching qualified investors with the opportunity to invest in European companies alongside institutional investors. Our focus is on the top teams in venture capital, growth equity, and buyouts, which offer access to innovative, high-growth companies and hidden industrial champions in Central Europe.

Why are you focusing on Europe as an investment location right now?

The geopolitical and economic changes of recent years have repositioned Europe as a stable and reliable economic area. Central Europe in particular has been consistently growing faster than the EU average for decades, shows significant lower government debt levels and lower inflation rates. This makes the region attractive – also for private equity investors who want to benefit from innovation and growth.

We follow the strong thesis that, the reindustrialization of Europe in strategically important key industries will take place in the countries of Central Europe. Anyone who wants to invest in the future of Europe should therefore consider to invest in this region.

What does this mean specifically for private equity investors? What opportunities are opening up in which industries?

Central and Eastern Europe is home to many so-called “hidden industrial champions” – companies that are global leaders in their niche but often little known. With our fund of funds, we invest specifically in such companies, for example in the areas of space tech, (cyber) security, and defense.

What distinguishes the fund-of-funds approach of Erste Diversified Private Equity II?

Investors in our fund of funds gain access and exposure to the growth region of Europe with a single investment ticket. These are small, fragmented markets that still offer little competition for high-quality assets. Our approach offers efficient diversification across different investment teams, strategies, sectors, and vintage years. This reduces risk and increases the chances of long-term value growth. Private equity is a challenging field that requires experience and access to the best managers and quality assets. Our fund of funds offers this access.

How do European private markets fare in an international comparison of returns?

For a long time, US funds were considered the benchmark. However, European funds deliver absolutely comparable returns over longer periods. In a 15-year comparison, we are on average on a par. The difference lies less in innovative strength than in the structure of the capital markets. A common, integrated European capital market is a key factor here in keeping the entire value chain in Europe.

Can you give an example of investments from your portfolio?

Our first fund, which was launched in 2022, invests in the German start-up Isar Aerospace, which develops carrier rockets for satellite launches, as well as in established industrial companies such as Borcad from Czechia. This diversity shows how broad our approach is – and how we focus specifically on European growth stories.

 

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