Private equity firms are under growing pressure to sell some of their investments, according to a new study.

Accountancy firm KPMG says European private equity groups have failed to sell off their investment at the same rate as they are putting money into new deals.

The disparity is damaging the industry's performance figures and even threatens the existence of some of the poorer performing funds, KPMG says.

Private equity has become an increasingly important part of the mergers and acquisitions landscape in recent years, despite a fall-off in investment in the technology sector following the bursting of the tech bubble in March 2001. Deals such as the taking private of Eircom and Jefferson Smurfit were largely funded by private equity groups. More recently, paper packaging products group Clondalkin changed hands in a deal that saw one group of private equity investors sell control to another.

The survey of 100 European private equity executives found that fewer had met exit criteria in 2003 than in 2000.

"Realisations [of investments\] by any means - sale to a trade or financial buyer, flotation or refinancing - have become much tougher in the past 12 months," notes the KPMG report.

Private equity groups traditionally look to capitalise on their investment within three to five years.