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VC more attractive than small cap market?

Background checks and research by private equity companies are more thorough than in the smaller companies quoted market, says Aon investment consultant.

Investment in good expansion stage venture capital projects may be less risky for pension funds and other investors than the small cap market, according to Aon Consulting's Tom Ross.

Speaking to, Ross said that since he had become involved with venture capital his opinions on the market had changed. He said that there had been an increase in the amount of money going into private equity and that there was an extensive amount of due diligence carried out. He said that in particular the middle stage of development capital seemed relative safe.

He said that given the large amount of background checks and research carried out in this stage of the market, compared to the amount carried out in relation to the smaller companies quoted market it was arguable which was the more risky investment. But he said the government's desire to up UK pension fund investment in venture capital projects might not lead to the expected resulting backing for entrepreneurial UK start-ups.

“If they are going to push pension funds to put 5 per cent into venture capital, only a small percentage of that will end up in UK businesses. The market is global.”

He said that the European market in particular might prove more attractive than domestic start-ups.

Ross was appointed as a non-executive chairman of Penta Capital, a private equity business, last summer.

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