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French PE market returns over 10 per cent per year in last 30 years

The French private equity market has produced an average annual return of 10.1 per cent over the last 30 years, according to a new report published by the Association Française des Investisseurs pour la Croissance (AFIC) and EY.

The net performance of closed-end funds meanwhile totalled 14.7 per cent per year.
 
“With an annual return of more than 10 per cent over 30 years, the French private equity sector’s overall performance has remunerated the savings allocated to the financing of start-ups, small- and medium-sized businesses (PME) and intermediate-sized businesses (ETI). This stable performance reflects the vitality of these companies funded by AFIC-member professional investors in unlisted companies,” says AFIC Chairman Olivier Millet.
    
French private equity again outperformed all the other major asset classes over the long term.
Over 10 years, the annual return on investment in unlisted French companies was 8.7 per cent, more than double that of the listed equities market (3.0 per cent for the CAC40 index, 4.1 per cent for the CAC All-Tradable – ex SBF 250). The real estate market and hedge funds meanwhile, recorded returns of 5.2 per cent and 3.2 per cent, respectively.
 
The French private equity generated average annual alpha of 8.3 per cent relative to the CAC 40 index over the decade, according to Oliver Gottschalg, the founder of PERACS, as part of a joint research study with AFIC. This alpha is defined as the asset class’s annual outperformance relative to a benchmark index, and it provides an indicator of private equity’s average outperformance independent of market conditions.
  
The venture capital segment recorded positive performance across all time horizons and generated increasingly higher returns across the shorter time horizons. As of end-2016, the segment’s average annual performance was 1.4 per cent over 30 years and reached 6.3 per cent over three years.
 
The growth capital and buyout capital segments continued to perform well. As of end-2016, they recorded respective average annual gains of 8.0 per cent and 14.0 per cent over 30 years.
 
“The French private equity trends observed in recent years were confirmed in 2016, with overall performance driven by high returns on buyout capital transactions along with favourable momentum in the innovation capital segment. The solid performance across all segments of the private equity market underscores the breadth of returns generated by this asset class, which finances the growth of French unlisted companies,” says Hervé Jauffret, a partner at EY.
 
The report on the net performance of French private equity market participants has been published for 23 years, since 1994, under the auspices of AFIC’s Research and Statistics Commission.

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