BVCA publishes performance measurement and investment activity reports

UK private equity firms increased investment activity throughout 2003 and outperformed UK pension fund assets and all FTSE Indices over three, five and ten year periods, according to the British Venture Capital Association.

UK private equity firms have continued to increase investment activity throughout 2003, according to the British Venture Capital Association’s (BVCA) Report on Investment Activity. The survey revealed that worldwide investment increased 16% to £6,357m, up from £5,466m in 2002.

Firms have maintained a strong global focus, with investment in overseas companies climbing to £2,283m in 2003, more than double the previous year’s figure of £986m.

The number of companies financed at the start-up and early stage rose from 398 to 427, an increase of 7%. At £263m, investment in start-ups and early stage companies represented some 7% of the total UK investment amount.

Sector focus

The amount invested in the technology sectors (communications, computer, electronics, biotechnology and medical) increased by 50% to £817m, up from £546m in 2002. This represented an encouraging increase after the previous year’s decrease of 67%. The number of technology companies financed by private equity climbed to 701 from 641 in 2002, a rise of 9%.

Biotechnology companies enjoyed increased financing in 2003, with investment up 45% from £58m to £84m. The number of biotechnology firms backed rose from 75 to 80, with early stage companies accounting for 74% of the amount invested

Strong performance

The BVCA’s Performance Measurement Survey shows UK private equity outperforming UK pension funds assets and all FTSE Indices over three, five and ten year periods. The survey of BVCA member firms reveals that net returns raised by private equity measured 14.2% over a ten year period; 10.2% over five years; 2.6% over three years and 12.3% during 2003. The strongest performance out of the UK private equity fund categories came from generalist and large MBO funds, which were the best performers in 2003 and over five and 10 years.

John Mackie chief executive, BVCA said: “The figures show that the UK private equity and venture capital industry continues to perform robustly. As an industry we invest in all sectors of the economy across every region of the country. These reports show once again that the industry is one of the major driving forces of the UK economy. As an asset class we outperform all comparable asset classes over the medium to long term.”

The surveys were completed by 100% of firms among the BVCA’s full members. The Report on Investment Activity includes the 164 members at the time the data was gathered, while the Performance Measurement Survey includes those members which raise funds from external sources.

UK performance
Three Years
Five Years
Ten Years
UK Private Equity
UK Pension Funds
FTSE All-Share
FTSE 100
FTSE 250
FTSE SmallCap
Source: BVCA