Large MBO funds are the best-performing sub-segment of UK private equity and venture capital investment, according to figures published by the British Venture Capital Association.
Defined as vehicles aiming to invest in management buyouts with at least £50m of equity, large MBO funds have earned their investors, net of costs and fees, 0.2 per cent in 2001, 13.4 per cent over three years, 16 per cent over five years and 18.4 per cent over ten years. They also outperformed other types of buyout and early stage funds since inception.
The findings reveal that large buyout funds have been a critical contributor to UK private equity’s overall investment performance, helping it to exceed returns generated by other asset classes.
UK private equity funds raised between 1980 and 2001 returned –7.1 per cent over one year, 13 per cent over three years, 15.7 per cent over five years and 17.4 per cent over ten years. They thus outperformed Total UK Pension Funds Assets as shown in the WM All Funds Universe of over 1,000 UK pension funds, which generated –8.9 per cent, 2.9 per cent, 7.7 per cent and 10.8 per cent respectively.
The BVCA numbers, compiled by PricewaterhouseCoopers and published in conjunction with Westport Private Equity, also confirm that early stage funds are having a tough time since the downturn in the technology sector. These venture capital funds, leading the pack in the boom year 2000, were the worst performers in private equity in 2001 and under-performing comparator indices.