Euro PE shows 33.3% IRR

Private equity has shown a 33. 3 per cent internal rate of return (IRR) according to recent figures unveiled at the European Venture Capital Association’s (EVCA) annual investors conference in Geneva this week. The 33.3 per cent figure is calculated from EURO69.8 billion of committed capital in 479 funds of which 427 are mature, that were formed between 1980 and 1998.

EVCA members provide the data and Venture Economics carries out the analysis, which is published in the annual Investment Benchmark report on a non-desegregated basis.

The results for last year showed a 14.9 per cent pooled IRR of all private equity funds since inception, with a particularly strong numbers for buyouts, which averaged 18.8 per

cent IRR. Venture stages also demonstrated favourable performance with 13.7 per cent IRR, and had the largest proportion of investment paid back to investors.

The European Investment Benchmark report, which will be printed and distributed in the next few weeks, notes that last year’s market conditions will influence private equity performance and that a slowdown in the market is expected. When considering horizon pooled IRR the relative decline in returns, with 15.6 per cent for one year, 29.2 per cent for three year, 25.8 per cent for five year and 16.3 per cent for the ten year IRR. This trend is also visible in top quarter performance, with 34.2 per cent for one year and 64.2 per cent for three year pooled IRR.

Jesse Reyes, vice president of Venture Economics, said: “Although the one year numbers demonstrate the effect of last year’s market corrections, long-term results are again very strong for this asset class. This is a long-term business where short-term numbers are irrelevant.”

“The positive performance results, together with current private equity entry pricing conditions and the increasing difficulty for companies to access finance from public markets, open up many new perspectives for European private equity,” said Dominique Peninon, chairman of EVCA’s investor relations committee.