The British Private Equity and Venture Capital Association’s (BVCA) latest survey of UK private equity and venture capital returns over the past decade show that the 10-year internal rate of return (IRR) for private equity almost doubled those of UK pension assets and the FTSE All-Share.
The UK trade body’s survey, which was conducted in association with PwC and Capital Dynamics, revealed that the combined 10 year IRR for UK PE and venture stood at 14.9 percent for 2014. By contrast, the UK pension fund assets and the FTSE All Share returned a relatively modest 7.8 percent and 7.6 percent, respectively.
It also highlighted the particular success of venture capital funds, which enjoyed their most successful year since the global financial crisis, with since-inception returns for pre-2002 funds being positive for the first time since the BVCA began monitoring performance.
Pre-2002 venture capital fund vintages obtained an IRR of 34.2 percent in 2014 and the asset class as a whole reached an annual IRR of 14.6 percent. Some of the strongest performance came from small management buyouts (MBOs), which saw a since-inception IRR of 14.9 percent and a 10-year IRR of 39.2 percent.
While not quite as impressive, the five-year IRRs for all funds covered in the survey were still strong. A return of 11.5 percent was comfortably ahead of the returns generated by total UK pension fund assets, at 9.4 percent, and the FTSE All-Share, at 8.7 percent.
John Dwyer, PwC deals leader, said: “Private equity has had its downs as well as ups over the last 10 years, and returns from different years tell their different stories. More recent, post-crisis vintages have performed well and successful exits over the last few years have shown how the industry can respond to a downturn, which is encouraging for investors.”
The performance management survey captures the performance of UK-managed funds, including independent funds, venture capital investments and MBOs, representing a vast majority of the UK private equity industry. ?