BVCA Private Equity and Venture Capital Performance Measurement Survey 2019
Throughout 2019, political and economic uncertainty continued to impact the UK and wider European economy. However, the human economic cost of the COVID-19 pandemic has, of course, overshadowed other issues in 2020. As we approach the end of this very difficult year, policymakers, investors and businesses alike are already turning their minds to the recovery, with a focus on innovation, including digital transformation, skills, and sustainability.
Private equity and venture capital will play a significant role in the recovery of the UK economy, backing entrepreneurs and management teams across all the nations and regions to grow businesses, support employment, expand internationally and boost productivity. BVCA members invested over £43bn in 3,230 UK businesses from 2015-2019, including £11bn in the Midlands and the north of England. Companies backed by private equity and venture capital currently employ 972,000 people in the UK and the overwhelming majority of the businesses our members invest in are SMEs. The private equity and venture capital industry is equally important to investors. It has consistently and continuously delivered excellent returns for its investors, as this report details.
The BVCA Private Equity & Venture Capital Performance Measurement Survey, produced in association with PwC, includes data from a direct survey of the BVCA’s eligible members. The survey contains information on 813 UK-managed funds and the results are provided net of fees and costs, including a provision for carried interest, where appropriate.
The primary method for calculating returns is the annualised internal rate of return (IRR), but we also report on multiples of drawn down cash or paid in capital.
For this year’s survey we had 117 responses, out of 154 eligible firms (a 76% response rate). More detail on methodology is included in the appendices, including review processes.
When comparing the performance of the industry with public markets, the five-year and ten-year annual returns were 20.1% and 14.2% respectively, compared to the FTSE All-Share, which returned 7.5% and 8.1% to investors over the same respective time periods. Further comparative data is included in this report.
As this is a long-term asset class, the most appropriate measure of the long-term performance of a venture capital and private equity fund is on a since inception basis. We present this on a vintage basis, as well as for the portfolio data set by segment (further explanation of why these metrics are used is set out later in this report). The survey shows that since 2008, all vintages have generated since inception IRRs in excess of 14%.
The since inception multiple returns are also impressive. Across all years, the DPI – the total amount distributed to investors as a percentage of paid-in capital – was 143.9%. The TVPI – the total amount distributed plus the residual value attributable to investors as a percentage of paid-in capital – was 179.1%.
Given that investors in private equity and venture capital include pension funds, insurance companies and endowments, these returns make an important contribution to their institutions and in turn to their beneficiaries such as pensioners and savers across the UK and the world.
We would like to thank the BVCA members that contributed data, and give special thanks to Mark Drugan from Capital Dynamics who has supported this report since its creation.
