First major UK analysis of its kind finds private equity and venture capital funds managed by BVCA members collectively outperform FTSE All-Share every year for last three decades

Top lines:
- New research from the British Private Equity & Venture Capital Association (BVCA) shows that, collectively, private equity and venture capital funds managed by its members have outperformed the UK stock market as represented by the FTSE All-Share1, the most comparable index for the range of small, medium and large investments held by UK private equity and venture capital funds, each vintage year2 since 1991.
- Since 1991, investors into private equity and venture capital funds have collectively earned a pooled return of 15.1% per annum. These annual returns are equivalent to investors nearly doubling their money, getting a 1.8x pooled return on capital invested, including the value of unrealised investments as at 31 December 2020.
- A Public Market Equivalent (PME) analysis compares these private capital returns to equivalent investments in a public index. BVCA analysis using two different PME measures shows that the returns generated for investors by funds managed by BVCA members have been better than those of equivalent investments in the FTSE All-Share index every year since 1991, with the exception of 2006 where the private market returns were higher on one measure and equal on the other.
- This new analysis can be found in the BVCA’s Performance and Public Market Equivalent Report 2020, published today.
Press release:
A new report from the BVCA applies two Public Market Equivalent (PME) methodologies to present a comparison of the relative performance of private capital funds managed by BVCA members against the UK public equity market, as represented by the FTSE All-Share Total Return index.
The findings are striking. The BVCA analysis shows that the private equity and venture capital funds in the dataset have collectively outperformed the public market as represented by the FTSE All-Share Total Return Index every year since 1991. The sole exception to this is 2006 when private equity and venture capital outperformed on one PME measure and was equal on the other.
A Public Market Equivalent (PME) analysis benchmarks the performance of investments into private equity and venture capital funds against the performance the public market would have generated over the same period using the same investment timings. This is the first time this methodology has been used on a dataset in the United Kingdom as broad and as deep as the BVCA’s membership, with the underlying data being taken from the BVCA’s Performance Measurement Survey 2020 which contains data on 873 funds going back to 1980.
Using data gathered from across the breadth of its membership for the 2020 Performance Measurement Survey, the BVCA’s Performance and Public Market Equivalent report shows that, not only are absolute returns strong, with investors collectively receiving a return of 15.1% per annum since 1991, but that relative returns are also good, with funds managed by BVCA members earning greater returns for investors than equivalent investments in the FTSE All-Share Index over the same time period.
The two measures used are the Capital Dynamics PME+ and the KS-PME:
- The BVCA PME+ analysis shows that, since 1986, investors in private equity and venture capital funds managed by BVCA members collectively earned a return of 14.7% per annum. In contrast, investors making equivalent investments in the FTSE All-Share Total Return Index would have earned a return of 6.7% per annum.
- The BVCA KS-PME analysis shows that, since 1986, investors in private equity and venture capital funds managed by BVCA members collectively earned 1.34x the amount they would have received from equivalent investments in the FTSE All-Share Total Return Index.
A key input into a Public Market Equivalent analysis is the benchmark index selected. The most appropriate benchmark index, given the size, geography and sector focus of the funds in the BVCA’s dataset, is the FTSE All-Share Total Return index. The report covers the period from 1986, as this is the first year for which the index data is available.
The methodologies contained within the BVCA’s PME report have all been reviewed and thoroughly tested by industry experts at Capital Dynamics and leading academic within the field of private equity research David Robinson, Professor of Finance at Duke University.
Michael Moore, BVCA Director General, said:
“We are delighted to present this thorough and transparent Public Market Equivalent analysis to help investors better understand the relative performance of private equity and venture capital compared to public markets.
“This research clearly shows the strong returns generated by private equity and venture capital, and why this attractive asset class should be considered as part of a portfolio for long term investors such as pension schemes. Developed with expert input from the industry and leading academics, this report is part of our mission to engage with, and learn from, all stakeholders in our industry and beyond.”
Suzi Gillespie, Head of Research at the BVCA, said:
“Our Performance and Public Market Equivalent report – focusing solely on funds managed from the UK – is an important contribution to the debate around private equity and venture capital and the returns generated for investors, both in absolute and relative terms.
“It is very important that we listen and learn from the greatest minds in academia and industry practice, as well as keeping pace with expected methodologies to ensure private equity and venture capital returns can be scrutinised accordingly.”
Notes to editors
- The BVCA’s Performance and Public Market Equivalent Report 2020 is available on our website here.
- An excel copy of the tables in the report is also available on the BVCA website here.
- About the FTSE All-Share Index
The FTSE All-Share Index is a market capitalisation weighted index representing the performance of equities of all eligible companies listed on the London Stock Exchange's main market, which pass screening for size and liquidity, in accordance with the Index methodology. The FTSE All-Share Index covers the combined universes of the FTSE 100, FTSE 250 and FTSE Small Cap Index and covers approximately 98% of the market capitalisation of the UK market.
The FTSE All-Share Index is the most comparable public benchmark to the BVCA’s Performance Measurement Survey dataset, as it is a Sterling denominated index containing companies of varying sizes, across all business sectors. A large proportion of companies in this index are headquartered and operate in the UK, although many have overseas operations. These features are consistent with the range of characteristics of the businesses backed by funds managed by BVCA member firms.
The BVCA is looking at producing a Public Market Equivalent analysis using different indices for smaller segments of the data set in future years, for example looking at technology funds only. - Vintage year is the first calendar year in which a fund makes its first drawdown. Grouping the data by vintage year allows us to look at the performance of the industry over time. As in the Performance Measurement Survey report, the Performance and Public Market Equivalent report does not report on the most recent four vintages (in this case 2017-2020) as these are young funds and are still at the capital investment stage.
- About the BVCA
The British Private Equity & Venture Capital Association (BVCA) is the industry body for the UK private equity and venture capital industry. The BVCA has over 750 member firms, including more than 450 fund managers and institutional investors, representing the majority of UK-based private equity and venture capital firms and their advisers. - For more information on any of the above, please contact External Communications Manager, Will English, at [email protected]
1 See ‘Notes to Editors’ number 3 above
2 See ‘Notes to Editors’ number 4 above