JAVIER ECHARRI
Secretary General
European Private Equity & Venture Capital Association 
Europe's buyout industry has not been immune to the huge volatility in the financial markets and global economy. Plummeting valuations in the wider market have put pressures at the fund level, while tightening credit supply and deteriorating trading conditions are making things difficult for portfolio companies. As business owners, the coming years will be the true measure of the private equity model. Our ability to invest for the long term, and responsibly steward businesses throughout the economic cycle will become more obvious. While deal volumes have fallen amid today's uncertainty, with nearly €80bn of dry powder available for European private equity investment, the industry is set to play an important role in Europe's economic recovery, through sound business investment. Against this background we will also face an increased regulation on the whole financial services sector, and PE is not going to be left alone in this sense. Regulation is not good or bad per se, but a hastily drafted law could undermine the ^PE industry's capacity to help contribute to the economic recovery of Europe.
Will the global crisis lead to a re-evaluation of the role of private equity and venture capital? What do the funds' investors think about these alternative investments in an altered risk/return environment? Those investors that have been involved with the industry over the long term will not be deterred by recent events. The crisis over the past 12 months was neither caused nor exacerbated by our industry and in some ways, private equity has actually proved itself much more resilient and able to cope with extreme market volatility, while many other forms of 'alternative asset class' became forced sellers. Our ability to invest over the longer term has proven very important amid this uncertain short-term situation. Some investors that came into the asset class late may need to recalibrate any expectations that were predicated on indefinitely plentiful supplies of credit. Credit finance is cyclical and always has been, but the private equity investment model is applicable across cycles. Sophisticated investors will be fully aware that 'crisis vintages' -those private equity funds raised during economic recessions - historically outperform by some margin.
What are the main challenges in the PE sector currently, apart from a possible orchestrating of refinancing and crisis management at portfolio companies? If you put aside the important activity of portfolio management, which is critical and is already demonstrating how much effort the PE houses do devote to their portfolios, then I would highlight 2 areas:
For the venture capital industry, attracting high quality institutional investment will continue to be a major focus for firms. Promoting European venture globally as an investment asset class is something EVCA spends a good deal of time on, through its Investor Relations Committee. The Venture portfolios are suffering less from the economic situation.
On the buyout side, PE firms may face various operational pressures associated with lengthening holding periods. For example the much lower exit volume and as a consequence the much more limited cash returns to investors affect their capacity to invest in new funds. Working out how to operate in a highly credit constrained environment will also be a concern. But private equity does not depend upon bank credit to operate, and this is something the market will undoubtedly work through.
What changes do you think we will see at a sector level in the next - highly unpredictable - two to three years? It is very difficult to predict what will happen from day to day let alone 3 years! There will be a weeding out of weaker players in the market. As believers in the market, we view this as healthy. What is more worrying are those quality firms that may get caught out simply because they happen to be at an unfortunate point in the fundraising, or investment and divestment cycle. Much will come down to the strength and quality of LP/GP relationships. I also think there is a big opportunity for private equity firms out of this turmoil. With cash to invest, talent and a real understanding of business issues, there will be many more private equity winners than losers from this period of turmoil, over the longer term.
CURRICULUM VITAE Javier Echarri is Secretary General of EVCA, the European Private Equity & Venture Capital Association. EVCA was founded in 1983 and has more than 1,400 members in 60 countries.
Mr Echarri joined EVCA in 1999, becoming its fourth Secretary General in 2000. Previously he was the Director of both Retail and Institutional Banking at ARGENTARIA bank (now BBVA) from 1995.
Mr Echarri began his career in the automotive and specialist engineering industries. He has also held the position of Secretary General at the Spanish Chamber of Commerce for Benelux.
Current engagements include non-executive board positions at the European Federation of Junior Enterprises (JADE), the Asia Pacific Venture Capital Association, buyout firm GED, and the secondary exchange platform Triago X.
He is a graduate in Economics and Business Studies from the University of Deusto in Spain and has a Post-graduate degree in European Union Economic integration from the University of Amsterdam.
European Private Equity & Venture Capital Association EVCA is the voice of European private equity and venture capital.
We promote and protect the interests of our more than 1,300 members, to ensure they can conduct their business effectively.
EVCA engages policymakers and promotes the industry among key stakeholders, including institutional investors, entrepreneurs and employee representatives.
EVCA develops professional standards, research reports and holds professional training and networking events.
EVCA covers the whole range of private equity, from early-stage venture capital to the largest buyouts.
For more information, please visit
www.evca.eu 
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