Despite a small recovery in the last quarter, the 2001 private equity performance figures from the National Venture Capital Association reveal a considerable fall in performance.
One-year venture capital investments across all stages returned a 27.8 per cent loss in 2001, reflecting the broader downward trend in the economy and the collapse of the capital markets. The news was better for private equity investments and buyouts, which recorded a loss of 13.4 per cent on investments. Mezzanine financing achieved the strongest figures, with investments in this sector recording only a 2.2 per cent loss.
The ten-year averages, the standard measuring device for investments and more meaningful than short-term assessments, remain positive for the asset class, with venture capital investments returning just over 26 per cent. Likewise can be said for private equity, which achieved a ten-year return of 17.3 per cent.
Investors can also take heart from a slight improvement in the figures for Q4 2001, following a -32.4 per cent return in Q3, although according to NVCA vice president, John Taylor, recovery could be a lengthy process. “Once the economy improves and technology spending begins to increase, it will take at least several quarters, if not several years, for private venture-backed companies to mature to the point when they are ready for an IPO or to be acquired by a larger entity.'