The combined 10 year internal rate of return (IRR) for UK-managed private equity and venture capital funds stood at 15 per cent for 2012, against 8.3 per cent for total pension fund assets and 8.8 per cent for the FTSE All-Share over the same period.
That is according to the BVCA’s annual Performance Measurement Survey for 2012, which includes data from 510 independent PE and VC funds and was produced in association with PwC and Capital Dynamics.
Private equity and venture capital fund performance also proved resilient during the economic downturn as shown by the five-year IRR. UK private equity funds generated an annual return of 6.0 per cent, exceeding the 2.5 per cent generated by the FTSE All-Share and the 3.8 per cent returned to holders of pension fund assets.
Small and mid-market buyout funds delivered returns in excess of 15 per cent for since-inception and 10 year IRR.
Venture capital funds, particularly those that began investing post-2002, returned IRRs of 3.6 per cent on a since-inception basis to investors in 2012.
The best returning fund vintages following the Dot-Com bubble originated from the years 2002 and 2004 as measured on the since-inception metric with IRRs of 25.5 per cent and 25 per cent per annum, respectively.
Since inception fund performance recorded an IRR of 13.9 per cent, marginally down on last year but still broadly in line with the 15 per cent average over the last decade.
Joe Steer, research director at the BVCA, says: “Despite the current economic malaise, both globally and domestically, UK private equity continues to deliver great returns to investors. This year’s one-year performance of 11.5 per cent IRR is evidence of a productive year in the face of challenging headwinds, and the since-inception returns remain strong and stable – highlighting an asset class whose robustness makes it an essential component of many investors’ portfolios.”
Marissa Thomas, partner and head of private equity at PwC, says: "This report demonstrates once again how the private equity industry is demonstrating its value as a long-term investment and providing investors with stable and persistent returns."
