Private Capital continues to outperform public markets over the long term, despite a more challenging 2024
New data from the BVCA and PwC shows that while private capital’s 1 year returns in 2024 reflect the subdued exit market, returns over a longer period outperform public markets.
The Performance Measurement Survey is an annual survey of fund level cash flows and valuations collected from BVCA members, and represents the largest primary research survey of its kind in the UK.
UK managed PE funds generated returns of 2.1% in 2024, due in part to a relatively quiet exits market, especially from those firms representing the larger investment class.
Looking at a 5 and 10-year horizon - buyout, midmarket and VC all outperformed the FTSE All Share Index and MSCI Europe Index, demonstrating private capital’s resilience and commitment to investing for the long term and generating returns for investors.
Over a 10-year horizon until 31 December 2024, UK private capital funds delivered an internal rate of return of 15.8% p.a. compared to 6.2% p.a. for the FTSE All share and 8.0% p.a. for the MSCI Europe Index. Over a 5 year horizon, private capital returned an IRR of 11.8% p.a. compared to 4.8% p.a. with the FTSE All Share and 6.7% p.a. for the MSCI Europe Index.
1 year |
3 years |
5 years |
10 years |
|||||
|
Venture |
-3.0 |
-0.2 |
12.0 |
13.3 |
||||
|
Small Private Equity |
9.0 |
7.8 |
11.2 |
12.9 |
||||
|
Mid Private Equity |
0.7 |
3.6 |
11.6 |
12.4 |
||||
|
Large Private Equity |
2.4 |
3.4 |
11.9 |
18.4 |
||||
Grand total all PE/VC funds |
2.1 |
3.6 |
11.8 |
15.8 |
The ten year horizon IRR figure gives a reliable picture of the overall performance of the industry capturing the intended investment period and potential value creation over multiple years. In contrast, the one year horizon return should be interpreted with caution as these figures are not a realistic representation of private equity and venture capital performance, since it is typically not possible to invest in private capital funds for just a year. However, the one year return is a useful indicator of the economic conditions in a particular year.
Small PE delivered strongest returns in 2024
One year returns for small PE funds, which witnessed a relatively higher volume of exits compared to other asset classes stood at 9.0% - comparable to growth seen in the FTSE All Share and ahead of the MSCI Europe Index.
Large buyouts delivered one year returns of 2.4%, while VC returns were -3% in 2024 reflecting a continued challenging market, with relatively few blockbuster exits.
Private capital continues to outperform public market benchmarks across every vintage
BVCA analysis of private capital vintages since 2005 shows that the industry consistently outperforms public markets, including the FTSE All-Share and MSCI Europe indices – chosen because of their similar range of investment sizes, sectors and geographies.
With private capital expected to be an increasing location for pension fund investments, the BVCA’s latest data confirms that PE and VC consistently generate returns for investors and would support the retirement income of pensions savers as well as providing an additional source of diversification.
The BVCA uses a Public Market Equivalent (PME) analysis to compare the performance of private equity and venture capital funds to public stock markets. This is because it accounts for when money is invested and returned, replicating the investment patterns of private market funds with listed indices. This supports a more rigorous like-for-like comparison than can be achieved from other commonly used methods of comparison.
Commenting, BVCA Chief Executive Michael Moore said:
“In a world where pension funds are looking to invest in private markets, the BVCA’s Performance Measurement Survey confirms that over the long term, private equity and venture capital offers a compelling proposition, delivering strong returns for investors while supporting 13,000 businesses across the UK.
“While the one year performance of the industry was muted, asset classes should be measured by their performance over the long term, and here the industry’s track record remains very strong.”
Notes to Editors:
For further information, please contact:
BVCA Press Office
Email: [email protected]
A full copy of the BVCA Performance Measurement Survey report can be found here.
The accompanying methodology paper can be found here and the datapack here.
Background:
About the British Private Equity & Venture Capital Association
The British Private Equity and Venture Capital Association (BVCA) is the industry body and public policy advocate for the private equity (PE) and venture capital (VC) (private capital) industry in the UK. With a membership of over 600 firms, the BVCA represents UK-based private capital, as well as the wider ecosystem of professional advisers and investors. The private equity and venture capital industry has a vital role to play in driving national and regional growth. Currently almost 13,000 companies, employing more than 2.5 million people, are backed by private equity and venture capital investment in the UK.
