PRINT THIS PAGE European private equity shows stable performance in 200717/03/2008. Source: AltAssets. 
The European private equity industry has produced a net IRR of 11.7 per cent in 2007, with buy-outs and venture capital returning 16.1 per cent and 4.5 per cent, respectively, according to preliminary figures compiled by Thomson Financial in collaboration with the European Private Equity and Venture Capital Association. These returns were on a pooled average basis. Buy-out funds showed slight variations in returns depending on fund sizes: 17.4 per cent for funds $250m-$500m in size, 21.9 per cent for the $500m-$1bn range and 15.6 per cent for buy-out funds of over $1bn.
In venture capital, the pooled averages of balanced venture capital (6.1 per cent) and development stage venture capital (7.8 per cent) funds scored well, while early stage venture capital stood at -0.1 per cent.
Top quartile funds produced excellent pooled IRRs across venture capital (15 per cent) and buy-out (33.4 per cent), with all top quartile private equity funds achieving 23.5 per cent.
The preliminary ten-year investment horizon return moved from 12.8 per cent in 2006 to 11.5 per cent in 2007 for all private equity funds. Both buy-out and venture funds registered positive ten-year returns of 16.6 per cent and 1.8 per cent, respectively.
As for the shorter-term indicators, the rolling five-year investment horizon return for buy-outs increased to 15.9 per cent, confirming the continued trend which started in 2004. The three-year indicator decreased marginally in 2007, from 22.1 per cent to 21.9 per cent. The rolling investment horizon for venture turned in mixed results in 2007. The five-year IRR moved into positive territory, from -1.7 per cent to nearly one per cent. The three-year IRR declined, though, from 5.5 per cent to 4.4 per cent.
The same results looked at by size of funds showed a much more nuanced picture. For example, with a three-year investment horizon, venture capital funds above $250m had the strongest IRR of the venture sample. For buy-out funds, the funds over $1bn showed the strongest returns during the three-year investment horizon, while those under $250m recorded the lowest returns for the same investment horizon. It is the middle-weight funds ($250m-$500m and $500mn-$1bn), though, which performed better than the other two segments in the ten-year investment horizon category, the report found.
Helmut Schühsler of TVM Capital, the EVCA chairman 2007-2008, said, 'The performance of European funds shows that the industry, overall, and in spite of the substantial funding issues in the credit markets, has a winning proposition. The detailed analysis shows great heterogeneity in the various sub-sectors, and slight changes in performance across longer time horizons, but we know that the industry is highly capable of adapting itself to new facts and market conditions, which allows us to look ahead with optimism. Notwithstanding the difficult environment for buy-outs in the second half of 2007, and the adverse exit market conditions for some sectors of the venture capital industry, the figures indicate that the European private equity and venture capital industry remains an attractive asset class.'
David Bernard, vice president, Thomson Financial, added, 'While the overall environment has become more challenging for the private equity industry in the last six months, the average performance remains strong with 11.7 per cent annual return net of fees to investors. This allows the industry to look ahead with confidence while many players adjust their practices to remain an attractive asset class.'
The final performance figures for 2007 will be published at EVCA's Symposium in Madrid in June.
Copyright © 2008 AltAssets
|
