New research finds private equity and venture capital funds managed by BVCA members collectively outperform FTSE All-Share Total Return, and MSCI Europe Total Return Index, every year since 2001

Top lines

• New research from the British Private Equity & Venture Capital Association (BVCA) shows that, collectively, private equity and venture capital funds managed by its members have outperformed the UK stock market as represented by the FTSE All-Share Total Return Index¹, and the MSCI Europe Total Return Index, the most comparable indices for the range of small, medium and large investments held by UK private equity and venture capital funds each vintage year² since 2001.
   
• Since 2001, investors into private equity and venture capital funds – such as Pension Schemes and University Endowment funds – have collectively earned a pooled return of 14.7% per annum. These annual returns are equivalent to investors nearly doubling their money, getting a 1.86x pooled return on capital invested, including the value of unrealised investments as at 31 December 2021.
   
• A Public Market Equivalent (PME) analysis compares these private capital returns to equivalent investments in a public index. BVCA analysis using two different PME measures shows that the returns generated for investors by funds managed by BVCA members have been better than those of equivalent investments in the FTSE All-Share Total Return and MSCI Europe Total Return indices every year since 2001.
   
• This new analysis can be found in the BVCA’s Performance and Public Market Equivalent Report 2021, published today.
   

Press release

A new report from the BVCA applies two Public Market Equivalent (PME) methodologies to present a comparison of the relative performance of private capital funds managed by BVCA members against the UK public equity market, as represented by the FTSE All-Share Total Return, and MSCI Europe Total Return indices.

The findings are striking. The BVCA analysis shows that the private equity and venture capital funds in the dataset have collectively outperformed the public market as represented by these indices every year since 2001, the first year in which both indices are available.

A Public Market Equivalent (PME) analysis benchmarks the performance of investments into private equity and venture capital funds against the performance the public market would have generated over the same period using the same investment timings. This is the second time this methodology has been used on a dataset in the United Kingdom as broad and as deep as the BVCA’s membership, with the underlying data being taken from the BVCA’s Performance Measurement Survey 2021 which contains data on 916 funds going back to 1980.

Using data gathered from across the breadth of its membership for the 2021 Performance Measurement Survey, the BVCA’s Performance and Public Market Equivalent report shows that, not only are absolute returns strong, with investors collectively receiving a return of 14.7% per annum since 2001, but that relative returns are also good, with funds managed by BVCA members earning greater returns for investors than equivalent investments in the FTSE All-Share and MSCI Europe Total Return indices over the same time period.

The two measures used are the Capital Dynamics PME+ and the KS-PME:

FTSE All-Share and MSCI Europe benchmarks

• The BVCA PME+ analysis shows that, since 2001, investors in private equity and venture capital funds managed by BVCA members collectively earned a return of 14.7% per annum. In contrast, investors making equivalent investments in the FTSE All-Share Total Return Index would have earned a return of 7.2% per annum, or 6.7% per annum from the MSCI Total Europe Return Index.
   
• The BVCA KS-PME analysis shows that, since 2001, investors in private equity and venture capital funds managed by BVCA members collectively earned 1.34x the amount they would have received from equivalent investments in the FTSE All-Share Total Return Index, or 1.37x from the MSCI Total Europe Return Index.

A key input into a Public Market Equivalent analysis is the benchmark index selected. The most appropriate benchmarks, given the size, geography and sector focus of the funds in the BVCA’s dataset, is the FTSE All-Share Total Return and MSCI Europe Total Returns indices. The report covers the period from 2001, as this is the first year for which the data for both indices are available.

The methodologies contained within the BVCA’s PME report have all been reviewed and thoroughly tested by industry experts at Capital Dynamics and leading academic within the field of private equity research David Robinson, Professor of Finance at Duke University.

Read the report

BVCA Director General, Michael Moore, said:

“We are delighted to present this second edition of our Public Market Equivalent analysis to help investors better understand the relative performance of private equity and venture capital compared to public markets. By extending our analysis to include an additional benchmark index we provide greater depth to the literature around the performance of private capital funds.

“This research clearly shows the strong returns generated by private equity and venture capital for its investors – including pension schemes and university endowment funds – and hence why this asset class should be considered as part of a portfolio for long term investors. Developed with expert input from the industry and leading academics, this report is part of our mission to engage with, and learn from, all stakeholders in our industry and beyond.”

Suzi Gillespie, Head of Research at the BVCA, said:

“Our Performance and Public Market Equivalent report – focusing solely on funds managed from the UK – is an important contribution to transparency on private equity and venture capital and the returns generated for investors, both in absolute and relative terms.”

Notes to editors

1. The BVCA’s Performance and Public Market Equivalent Report 2021 is available on our website here.
    
2. An excel copy of the tables in the report is also available on the BVCA website here.
    
3. About the Indices
   The FTSE All-Share Index is a market capitalisation weighted index representing the performance of equities of all eligible companies listed on the London Stock Exchange's main market, which pass screening for size and liquidity, in accordance with the Index methodology. The FTSE All-Share Index covers the combined universes of the FTSE 100, FTSE 250 and FTSE Small Cap Index and covers approximately 98% of the market capitalisation of the UK market.
   
   The MSCI Europe Index captures large and mid cap representation across 15 Developed Markets countries in Europe*. With [427] constituents as at 31 December 2021, the index covers approximately 85% of the free float-adjusted market capitalization across the European Developed Markets equity universe, covering all industry sectors. The Gross Total Return data in Euros is available daily from 1 January 2001, with the introduction of physical Euro notes and coins.
   
   * These are: Austria, Belgium, Denmark, Finland, France, Germany, Ireland, Italy, the Netherlands, Norway, Portugal, Spain, Sweden, Switzerland and the UK.
   
   These indices are the most comparable public benchmarks to the BVCA’s Performance Measurement Survey dataset, as they contain companies of varying sizes, across all business sectors. A large proportion of companies in this index are headquartered and operate in the UK and Europe, although many have operations elsewhere. These features are consistent with the range of characteristics of the businesses backed by funds managed by BVCA member firms.
    
4. Vintage year is the first calendar year in which a fund makes its first drawdown. Grouping the data by vintage year allows us to look at the performance of the industry over time. As in the Performance Measurement Survey report, the Performance and Public Market Equivalent report does not report on the most recent four vintages (in this case 2018-2021) as these are young funds and are still at the capital investment stage.
    
5. About the BVCA
   The British Private Equity & Venture Capital Association (BVCA) is the industry body for the UK private equity and venture capital industry. The BVCA has over 750 member firms, including more than 450 fund managers and institutional investors, representing the majority of UK-based private equity and venture capital firms and their advisers.
    
6. For more information on any of the above, please contact External Communications Manager, Will English, on [email protected]

1. See ‘Notes to Editors’ number 3 above
2. See ‘Notes to Editors’ number 4 above