UK private equity continues to outperform equities

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UK- Private equity investments in the UK have outperformed UK pension fund assets over the past three five and ten years according to figures published by the British Venture Capital Association.

Although funds raised between 1980 and 2001 lost 7.1% in the year to last December, over three, five and ten year periods, they returned a respective 13%, 15.7% and 17.4%.

In the ten years to June, the median balanced fund run by equity managers returned more than eight points less, or 9%, according to the performance measurement company Russell/Mellon Caps.

The BVCA figures suggest it was larger management buyout and non-technology funds that were the best performers of the year- a reversal of 2000 when early stage technology funds were the best performers.

Top quartile private equity managers returned at least 28% per annum for the last three years compared with top equity managers who struggled to produce more than –3%.

Last year UK institutions moved e20bn into private equity while European funds raised e38bn. Yet despite the impressive figures, the level of activity in Europe is easing up.

According to figures released by independent data provider Initiative Europe, the second quarter of this year witnessed just 57 buyouts worth e5.2bn, compared with 96 deals worth a combined e22.9bn over the same period last year.

One of the reasons for the disappointing figures is a drop in the number of large deals that helped to boost the market in 2001. Fundraising activity was less disappointing, however, with e12.8bn raised in the second quarter compared with a healthier e15.5bn during the same period last year.

A recent report by the Economist Intelligence Unit estimated private equity investment will continue to grow over the next ten years and pension funds in the US and Europe are expected to double their allocation to the asset class.

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