Long-term European private equity performance remains robust

The one-year horizon performance has improved marginally by 3.5 per cent for buy-outs, 3.1 per cent for private equity overall and a slight decrease of 1.3 per cent for venture capital. Given private equity’s patient ownership structure, the one-year figures do not reflect the stock market rally during 2009.

The five-year internal rates of return fell from 8.5 per cent to 6.1 per cent in 2009. The decline is largely driven by buy-outs, which dropped from 11.1 per cent as of 2008 to 7.9 per cent in 2009, while venture returns fell from 1.6 per cent to 0.7 per cent.

The long-term performance of the European private equity industry remains robust, with net internal rate of return since inception to December 2009 remaining strongly positive, at 8.8 per cent for all private equity, with buy-out funds returning 11.8 per cent and venture funds returning 1.6 per cent. This compared with performance to the end of 2008 of 9.5 per cent, 12.7 per cent and 1.9 per cent, respectively. Private equity long-term performance outstrips public market comparators, such as the HSBC Small Company index (6.8 per cent) and Morgan Stanley Euro Equity index (0.7 per cent).

Leon Saunders Calvert, global head of deals and private equity at Thomson Reuters, said, “Following a further year of market volatility which has not been conducive to financial sponsor activity, private equity as an asset class continues to demonstrate that as a long-term investment option it outperforms public stock market indices.”

Top quarter performance remained very strong with a 21.4 per cent pooled average net IRR for all European private equity funds.

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