Latest figures from Thomson and PEREP

Preliminary performance figures compiled by Thomson Financial in collaboration with the European Private Equity and Venture Capital Association (EVCA) were presented at the EVCA Investors’ Forum in Geneva earlier this month. They show that despite the credit crunch, private equity buyout returns hit a record high of 16.1% in 2007.

The performance figures relating to the private equity industry as a whole on a pooled average basis show an overall 11.7% return by the asset class, net of management fees and carried interest with venture capital returning 4.5%.

Within those broad buyout and venture capital bands it was the large and medium buyout funds that proved to be the best performers last year, showing returns of 21.9% and 17.4% respectively.

The performance figures also show the returns generated by venture and buyout funds of differing sizes over three, five and 10-year investment horizons. Overall, both buyout and venture funds generated positive 10-year returns of 16.6% and 1.8% respectively. Within that horizon, it was the buyout funds of between US$500m and US$1bn that registered the highest returns of 24.8%, while venture funds of below US$50m produced the best IRR of 3.3%.

Looking at the shorter three-year horizon, the buyout and VC funds generated returns of 21.9% and 4.4% respectively. Within both categories it was the largest buyout and venture funds that registered the strongest returns. Buyout funds over US$1bn produced the highest IRR, of 28.6%, and it was the venture funds over US$250m that brought with them the best returns, of 9.3%.

Commenting on the 2007 final performance figures, Helmut Schühsler of TVM Capital and EVCA chairman 2007–08, said: “The performance of European funds shows that the industry, overall, has a winning proposition. The figures for 2007 show an overall average return of 11.7%, which also allows us to look ahead with optimism. The figures indicate that the European private equity and venture capital industry is strong and we therefore expect 2008 to be another year of strong returns for our investors.”

David Bernard, vice-president at Thomson Financial, said: “While the overall environment has become more challenging for the private equity industry in the last six months, the average performance remains strong, with an 11.7% annual return net of fees to investors. This allows the industry to look ahead with confidence while many players adjust their practices to remain an attractive asset class.”

PEREP Analytics, an independent research group backed by the EVCA and a number of national associations, also unveiled its first batch of data. The research said that 2007 had been relatively healthy for the industry, with €74.3bn of buyout funds raised, compared with €71.8bn in 2005, but not matching last year’s €112.3bn.

Investment levels were slightly higher, with €56.8bn invested in buyouts in 2007 compared with €53.9bn in 2006, although transactions with equity tranches of more than €300m were down by 31%, dropping from 26.1% in 2006 to 17.7% last year. Large buyouts of between €150m and €300m and mid-market deals of between €15m and €150m both saw increases, from 10.2% to 20.4% and 25.9% to 32.5% respectively.