UK private equity industry proves downturn resilience

Alice Murray
11 June 2013

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UK private equity and venture capital funds generated a 6% 5-year IRR during the five years throughout the financial crisis, outperforming the 2.5% achieved by the FTSE All-Share, according to a recently published study.

The BVCA's Performance Measurement Survey, produced alongside PwC and Capital Dynamics, reviewed 510 UK-based independent private equity and venture capital funds.

The study found that the combined 10-year IRR of the funds came in at 15% as of 2012, compared with 8.3% for total pension fund assets and 8.8% for the FTSE All-Share over the same period.

The picture was even brighter for small and mid-market buyout funds, which generated 10-year IRRs of more than 15%. For venture funds that began investing after 2002, IRRs averaged 3.6% in 2012.

However, the IRRs reported in the study do not account for costs, fees and charges. The BVCA notes that the omission of management fees and costs makes the IRRs not directly comparable with pension fund assets.

The study does highlight the asset class's ability to offer stability to its investors. On average over the last 10 years, "since inception" funds (funds reviewed over their entire lifetime) have delivered IRRs of around 15%. This year, the funds returned 13.9%, a decrease on last year's values but broadly in line with the trend over the past decade.