The private equity asset class in Europe continued to perform well in 2000, with outstanding results for the top quarter in all stages of investment, showing an internal rate of return (IRR) of 33.3% since inception.
The preliminary results from the latest Investment Benchmarks Study carried out by Venture Economics, in co-operation with the European Private Equity and Venture Capital Association (EVCA), were presented at the Annual EVCA International Investors Conference, 14-15 March 2001 in Geneva, Switzerland.
The sample data include a total of euro69.8 billion of committed capital in 479 funds (of which 427 are mature, i.e. formed 1980-1998). This year’s Investment Benchmarks Study includes data to December 2000, providing the latest and most representative pan-European performance measurement information, and allowing for comparison with other asset classes.
CONTINUED AND OVERALL STRONG PERFORMANCE IN ALL STAGES
The 2000 results show a 14.9% pooled IRR of all private equity since inception of fund, with particularly strong numbers for buyouts (18.8% IRR). Venture stages also demonstrate favourable performance with 13.7% IRR since inception, and showing the largest proportion of investment paid back to investors.
MARKET CORRECTION
However, last year’s market conditions will have its influence on private equity performance and a slowdown in the market is expected. When considering horizon pooled IRR, we can see the relative decline in returns, with 15.6% for one year, 29.2% for three year, 25.8% for five year and 16.3% for the ten year IRR. This trend is also visible in top quarter performance, with 34.2% for one year and 64.2% for three year pooled IRR.
Commenting on the results of the study, Mr Jesse Reyes, Vice President of Venture Economics, said: “We are very pleased with the study results. 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 indeed a long term business where short term numbers are irrelevant. The positive performance results, together with current private equity entry pricing conditions and teh increasing difficulty for companies to access finance from public markets, open up many new perspectives for European private equity,” adds Mr Dominique Peninon, chairman of EVCA’s Investor Relations Committee.
The 2001 edition of the Investment Benchmarks Report will be released in the coming weeks. It is the only independent, commercial study on pan-European private equity performance available. Undertaken by Venture Economics in cooperation with the EVCA, this annual initiative, which began in 1996, has established benchmarking measures for European private equity that are directly comparable with those available in the US. It allows private equity players to compare themselves with overall performance and investors to measure one asset class against another.
INVESTMENT BENCHMARK REPORT – PRELIMINARY RESULTS 2000
Annualised IRR from inception to Dec 31, 2000
Stage/ No./ Pooled/ Upper Quartile/ Median/ DPI/ RVPI/ TVPI
Early/ 63/ 12.5/ 21/ 8.2/ 0.86/ 0.77/ 1.63
Development/ 71/ 11.1/ 13.4/ 5.4/ 1.03/ 0.62/ 1.65
Balanced/ 65/ 15.2/ 16.8/ 8.0/ 1.32/ 0.98/ 2.30
All venture/ 198/ 13.7/ 16.3/ 7.2/ 1.13/ 0.83/ 1.96
Buyouts/ 135/ 18.8/ 21.0/ 10.8/ 0.83/ 0.79/ 1.62
Generalist/ 93/ 11.0/ 13.7/ 5.2/ 0.84/ 0.68/ 1.52
All private equity/ 427/ 14.9/ 18.1/ 7.3/ 0.88/ 0.77/ 1.65
Horizon pooled IRR to Dec 31, 2000
Stage/ 1 year/ 3 year/ 5 year/ 10 year
Early/ 26.0/ 14.5/ 24.0/ 14.3
Development/ 31.5/ 21.4/ 19.4/ 11.8
Balanced/ 40.4/ 56.4/ 45.4/ 20.7
All venture/ 35.6/ 36.3/ 33.6/ 17.2
Buyouts/ 10.9/ 30.6/ 26.2/ 18.0
Generalist/ 1.9/ 12.6/ 17.8/ 12.3
All private equity/ 15.6/ 29.2/ 25.8/ 16.3
Annualised IRR from inception to Dec 31, 2000 – results for funds in TOP QUARTER
Stage/ No./ Pooled/ Median/ DPI/ RVPI/ TVPI
Early/ 16/ 37.1/ 33.5/ 1.65/ 1.89/ 3.54
Development/ 18/ 19.2/ 21.0/ 1.88/ 1.95/ 3.83
Balanced/ 16/ 43.8/ 35.3/ 2.96/ 1.90/ 4.86
All venture/ 50/ 31.0/ 29.7/ 2.28/ 2.08/ 4.36
Buyouts/ 34/ 37.0/ 36.7/ 2.62/ 1.43/ 4.05
Generalist/ 23/ 13.0/ 21.1/ 1.74/ 1.10/ 2.84
All private equity/ 107/ 33.3/ 29.3/ 2.19/ 1.73/ 3.91
Horizon pooled IRR to Dec 31, 2000 – results fro funds in TOP QUARTER
Stage/ 1 year/ 3 year/ 5 year/ 10 year
Early/ 59.9/ 42.8/ 54.6/ 38.6
Development/ 45.9/ 32.2/ 34.5/ 22.6
Balanced/ 75.9/ 110.7/ 77.3/ 46.2
All venture/ 55.9/ 65.2/ 56.2/ 37.0
Buyouts/ 21.1/ 73.7/ 59.6/ 32.7
Generalist/ 5.7/ 15.2/ 21.9/ 14.5
All private equity/ 34.2/ 64.2/ 54.7/ 33.4
Annualised IRR from inception to Dec 31, 2000 – results for funds in UPPER HALF
Stage/ No./ Pooled/ Median/ DPI/ RVPI/ TVPI
Early/ 32/ 20.3/ 23.1/ 1.31/ 1.50/ 2.81
Development/ 35/ 15.8/ 13.8/ 1.42/ 1.05/ 2.47
Balanced/ 33/ 21.2/ 16.8/ 2.04/ 1.30/ 3.34
All venture/ 99/ 18.9/ 16.8/ 1.82/ 1.00/ 2.82
Buyouts/ 67/ 29.9/ 21.0/ 1.01/ 0.78/ 1.79
Generalist/ 47/ 12.4/ 13.2/ 1.67/ 1.35/ 3.02
All private equity/ 213/ 18.5/ 18.1/ 1.55/ 1.16/ 2.71
Horizon pooled IRR to Dec 31, 2000 – results for funds in UPPER HALF
Stage/ 1 year/ 3 year/ 5 year/ 10 year
Early/ 40.5/ 21.9/ 32.0/ 20.2
Development/ 36.2/ 31.8/ 26.6/ 17.3
Balanced/ 35.1/ 53.3/ 43.0/ 24.5
All venture/ 36.3/ 41.6/ 36.7/ 21.6
Buyouts/ 18.9/ 55.7/ 47.7/ 28.2
Generalist/ 5.4/ 15.2/ 20.5/ 13.8
All private equity/ 16.4/ 35/ 32.6/ 19.8
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