The study looked at 479 funds with a committed capital total of E69.8bn and includes data up to the end of December 2000. Of those funds, 427 are mature, having been raised from 1980-1998. Using the benchmark of annualised internal rate of return [IRR], the study reveals that the 107 private equity funds in the top quartile of those surveyed delivered an IRR of 33.3 per cent from inception to 31 December 2000.
IRR is calculated as an annualised effective compounded rate of return for a fund using monthly cash flows and annual valuations.
The study also included figures for pooled IRR – where the IRR is determined by each surveyed fund's cash flows from inception and residual valuations being collected in to a single pool. Pooled IRR for all private equity funds was 15.6 for the past year, compared to 29.2 for a three year period. Buyout funds showed a pooled IRR of 10.9 for the past year as opposed to 30.6 for the three year term and generalist funds dropped from a 12.6 three year figure to 1.9 over the one year term.
If one looks at the top quartile of funds surveyed only, then the pooled IRR for all private equity funds was 34.2 over the past year, compared to 64.2 for the three year term, and 33.4 for the ten year term.
Dominique Peninon, chairman of EVCA’s investor relations committee was quick to remind attendees at the annual EVCA International Investors Conference currently being held in Geneva, that one year performance figures can mislead. “This is a long-term business where short-term numbers are irrelevant. The positive performance results, together with current private equity entry pricing conditions and the increasing difficulty for companies to access finance from public markets, open up many new perspectives for European private equity” he said.