Buyout firms beat the slump to record major gains for 2011
THE INVESTMENTS made by private equity and venture capital firms have continued to outperform rival asset classes despite a turbulent year for the industry.
The internal rate of return – the average annual return over each of the past ten years – hit 14.3 per cent in 2011, compared to 5.9 per cent for total pension fund assets and 4.8 per cent for the FTSE All-share index, according to research from the British Private Equity & Venture Capital Association (BVCA). This was down from the 14.6 per cent achieved in 2010.
Over a five year period, UK private equity produced an annual return of eight per cent, in contrast to pension fund assets that generated 3.5 per cent and the All-Share index, which returned 1.2 per cent.
The survey of 501 UK managed funds showed that BVCA members invested £18.6bn globally in 2011, down nine per cent from 2010.
The figures come after a turbulent period for buyout firms, with the European sovereign debt crisis depressing deal values. The industry also had to withstand a series of attacks, with Labour leader Ed Miliband criticising “asset strippers and vultures” and US Republican presidential candidate Mitt Romney coming under fire for his previous role as a co-founder of Bain Capital.
“These data show that private equity and venture capital continue to weather the UK’s weak economic climate and deliver long-term returns to investors,” said Joe Steer, research director at the BVCA, which produced the report with PwC and Capital Dynamics.
“In the face of uncertainty of the direction of the global economy, prolonged Eurozone weakness and financial market volatility, returns this year remained positive, and over the longer term continue to outperform other asset classes.”