During what has been described as the “worst economic downturn in recent memory” by Vincenzo Morelli, European Private Equity and Venture Capital Association (EVCA) chairman, private equity performance has remained stable.
The asset class has outperformed its comparators in the public market and returns for investors have remained almost constant throughout 2011, revealed EVCA and Thomson Reuters’ performance report.
A five year rolling IRR, measuring each year-end starting at 2010 and going back five years, showed the Morgan Stanley Euro Equity index reflecting economic conditions with -9.72 percent decline. The HSBC Small Company Equity Index was also negative and showed a -6.2 percent drop.
In contrast, private equity firms delivered a five year rolling IRR of 1.55 percent.
“This stability is core to the asset class’ appeal to pension funds, insurance companies and other investors with long-term liabilities,” said Morelli in a statement.
The report, which averages the IRRs of the 1,431 buyout and venture funds in the study, showed a net pooled IRR of 8.95 percent. The best performing buyout funds in the study were in the €250-500 million range, recording a 20 percent net return since inception.
Vintage year statistics revealed that 2009 produced the best returns (29.92 percent) in the last ten years of private equity. But in terms of groupings the 1990-1994 and 2000-2004 groups registered the highest returns. This would suggest that testing economic conditions actually generate superior performance.
Ranking geographies on a five year horizon showed US venture and buyouts performing better than their European counterparts. But in the long term the European private equity market rendered better returns on ten year horizon IRRs.