Venture capital has benefited from the record levels of capital flowing into the asset class, according to new figures from the European Private Equity and Venture Capital Association, as investors look to boost their allocations and take advantage of the private equity industry’s strong returns.
EVCA’s latest figures, based on research from Thomson Financial and PwC, show that European private equity and venture capital firms raised a record €112 billion ($149 billion) in 2006, a 56.4 percent increase on the previous year. Much of this went to buyout funds, which raised €84 billion altogether, but there was also €17 billion raised for venture capital funds – a 60 percent increase on the €11 billion raised in 2005 and the second highest total ever, behind 2000.
The volume of venture activity was also up, accounting for 76 percent of all deals. However, performance continued to lag behind, with upper quartile venture funds recording returns of 17.4 percent – well below those for buyout funds.
The general picture for private equity was predictably rosy, with the industry recording an impressive one year return of 36.1 percent across the board. Buyout funds performed particularly well, with the upper quartile now boasting an internal rate of return of 31 percent since inception.
There were also record levels of private equity investment across the continent in 2006. In total, €71 billion of private equity capital was invested in European companies – up 51.2 percent from €47 billion in 2005. The UK was once again the most popular destination for private equity capital in 2006, accounting for 33 percent of the total invested, while France was second on 15.2 percent and Germany third on 10.2 percent.