PE performance: steady returns

EVCA final performance figures show steadily improving returns across all parts of the industry, according to figures compiled by Thomson Financial and PricewaterhouseCoopers on behalf of the European Venture Capital Association (EVCA.) Since inception, the private equity industry has returned 10.3%, net of management fees and carried interest, with buyouts and venture capital returning 13.7% and 6.3%, respectively.

Both buyout and venture funds show an increase on 2004 levels. When analyzing the top quarter performing funds, buyouts returned 31.8% and venture funds 17.1%.

The ten-year investment horizon for all private equity funds has increased to 11.4% in 2005 from 10.8% in 2004. Both buyout and venture funds registered positive ten-year returns of 14.3% and 6.4%, respectively.

Gemma Postlethwaite, vice president at Thomson Financial, said: “These results just reinforce the picture drawn earlier this year of an attractive asset class with increasing returns and a capacity to invest a larger amount of money. Times are good for the private equity industry and all indicators show a favourable environment in the short and medium term, but investors should be looking to ensure longer term funds maintain their focus on value creation and not rely on favourable market conditions and cheap debt to drive returns.”