The BVCA has today published its Performance Measurement Survey, assessing the performance of 458 UK-managed independent private equity and venture capital funds in 2008.
· The survey shows that private equity and venture capital funds continue to outperform other asset classes over the long-term, with a combined ten-year internal rate of return of 15.4% against 3.7% for total UK pension fund assets and 1.2% for the FTSE all-share over the same ten-year period.
· The data also reveals that funds invested during previous economic downturns have produced excellent returns for investors while venture capital funds continue to show signs of improvement in the aftermath of the dotcom crash.
· The effect of the credit crunch and recession is reflected in the 2008 annual IRR of -9.8%, which although favourable in comparison with public market performance falls to -30.3% when adjusted for exchange rate movements.
The full summary of the 2008 survey can be viewed here
Ashley Coups, Private Equity Assurance Leader, PricewaterhouseCoopers LLP, said:
"It comes as no surprise that the sands are shifting in the UK private equity landscape, which in recent years has been dominated by the large buyouts generating the lion's share of medium term returns. The 2008 survey results reflect the effects of the economic downturn on these typically highly leveraged companies, as well as the significant reduction in realisation opportunities caused by the curtailment in leveraged lending. Funds that focus on medium sized deals are now generating higher returns than their large-MBO focused peers over a 5 year period, and the gap has significantly narrowed between the small/mid-size to large buyout funds over the longer term. What remains evident though is that throughout various economic cycles and shocks over the past ten years, private equity continues to be a stable source of return for long term investors."
Roger Kelly, Chief Economist, BVCA, said:
"2008 has been a challenging year for most asset classes including private equity, but write-downs which lead to a fall in fund valuations are a snap-shot of current market conditions not an indicator of long-term performance or ultimate returns to LPs. As the survey clearly shows, private equity has outperformed other asset classes over a longer time horizon and this focus on creating value over the long-term is precisely what the UK economy needs to put it on a path of sustainable, lasting growth. With asset prices depressed there are excellent buying opportunities for private equity firms and investments in 2008 and 2009 are likely to generate some of the best returns for investors. It is also encouraging to see an improvement in venture capital performance, which should encourage institutional investors to return to the asset class after the experience of the dotcom crash."
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For further information please contact:
Nathan Williams, BVCA: 020 7025 2967
Rebecca Mill, PricewaterhouseCoopers LLP: 020 7213 5829
Notes to Editors
The BVCA - the British Private Equity and Venture Capital Association - is the industry body for the UK private equity and venture capital industry. The BVCA has over 450 member firms, representing the overwhelming number of UK-based private equity and venture capital firms and their advisers
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