German private equity investment hits 6-yr high

BERLIN Feb 21 (Reuters) - Investment by private equity firms in Germany rose by 13 percent in 2007 to some 4.1 billion euros ($6.03 billion), the largest volume in six years, the country's BVK industry association said on Thursday.

"The rise in investment can be put down to an increase in buy-out investments," the BVK said in a statement.

"However, this positive result can't disguise continuing dissatisfaction in the industry about the government and the legal framework (for private equity) in Germany," it added.

Fund-raising by German private equity firms reached 4.2 billion euros last year, a gain of roughly 50 percent on 2006. It was also the second highest sum raised since German reunification in 1990. Only in 2000 was the figure higher.

"The outlook for 2008 is one of cautious optimism," the BVK said. "Fund-raising is unlikely to reach last year's level, because a lot of firms have closed new funds recently and the planning tends to suggest there will be more new funds in 2009."

Insurers provided nearly a quarter of the funds raised in 2007, with funds of funds accounting for around 15 percent.

BVK statistics showed that its membership had risen for a second straight year to a record 197 firms -- which include private equity subsidiaries of foreign investors.

Germany's private equity market remains relatively small in comparison to countries like Britain and France.

The cabinet last year agreed on a plan to improve conditions for private equity investment, though the proposed measures were criticised by the BVK for not going far enough.

The industry came under the spotlight in Germany in 2005 when a senior member of the governing Social Democrats said some financial investors behaved liked "locusts," a term that has since become common parlance among politicians. (Reporting by Dave Graham; editing by Tony Austin)