performance benchmarks 2008 european private equity
DESCRIPTION
Performance Benchmarks 2008 European Private Equity. Conducted by Thomson Reuters on behalf of EVCA. Methodology for Performance Benchmarks. All calculations are done at the fund level by Thomson Reuters based on cash flows and NAVs reported by participating GPs - PowerPoint PPT PresentationTRANSCRIPT
Performance Benchmarks 2008European Private Equity
Conducted by Thomson Reuters on behalf of EVCA
Methodology for Performance Benchmarks
All calculations are done at the fund level by Thomson Reuters based on cash flows and NAVs reported by participating GPs
Returns are net of management fees and carried interest
Returns are calculated with cash flows in Euros for European figures
Cash flow database contains 1,331 European funds since its inception
Definitions: Pooled IRR:
IRR for a group of funds where their cash flows have been aggregated before the IRR calculation
Investment Horizon Return: IRR calculated with Net Asset Value at the beginning of period as capital outflow, Net Asset Value at the end of period, and actual cash flows in between
Background
GPs
Global economic downturn
Lack of leverage for new deals
Difficult exit environment
Non-existent IPO market
LPs
Financial crisis
Global economic downturn
Low distributions lead to difficulties in servicing commitments
Denominator effect triggers over-exposure to Private Equity
Extremely difficult market conditions for GPs and LPs in the last 12 months
Investment Benchmarks DatabaseEuropean Sample Growth
Report Year Number of Funds in the Sample
Committed € Bn.
1998 438 51.4
1999 511 68.8
2000 573 87.6
2001 665 108.8
2002 774 135.4
2003 881 149.5
2004 956 159.6
2005 1,069 205.2
2006 1,141 237.9
2007 1,215 300.5
2008 1,331 326.5
Source: Thomson Reuters on behalf of EVCA
Mid- to Long-Term IRRs for European Venture
-15
-10
-5
0
5
10
15
20
25
30
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
Ro
llin
g I
RR
s (%
)
10-year IRR
5-year IRR
3-year IRR
+0.2
-0.6
+1.8
European Venture 3-,5-,10-Year Rolling IRRs
Source: Thomson Reuters/EVCA
Returns calculated in EUR
3-year Buyout Horizon IRR in Europe Declines SteeplyMid- to Long-Term Performance of European Buyout Funds Remains Strong
0
5
10
15
20
25
30
35
40
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
Ro
llin
g I
RR
s (%
)
10-year IRR
5-year IRR
3-year IRR
+11.6
+3.5
+10.8
European Buyouts 3-,5-,10-Year Rolling IRRs
Source: Thomson Reuters/EVCA
Returns calculated in EUR
European Buyout Funds Show Best Performance Over a 5-year Horizon
-10
0
10
20
30
40
50
60
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
5 Y
ear
Rol
ling
IRR
(%
)
Venture
Buyouts
+1.8
+10.8
Returns for Europe calculated in EUR Returns for US calculated in US$
Source: Thomson Reuters/EVCA
-10
0
10
20
30
40
50
60
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
5 Y
ea
r R
olli
ng
IRR
(%
)
Venture
Buyouts
+6.3
+8.3
Europe USA
European Top Quarter Performance at Above 20% Funds Formed 1980-2008
Stage Pooled IRR
Upper Quartile
Net Pooled
Top Quarter
IRR
Early Stage -1.3 1.1 12.6
Development 7.4 9.0 18.9
Balanced 3.0 5.7 14.7
All Venture 3.0 4.8 13.5
Buyout 13.0 17.6 31.2
Generalist 9.0 9.3 22.0
All Private Equity
9.5 9.7 22.7
25
50
75
100
-2.5%
-27.2%
9.5%
Net IRRPercentile
6.0%
22.7%
Source: Thomson Reuters/EVCA
0.0%
-6.0%
Net Pooled for the Quarter
Short-Term Performance Reflects the Impact of the Downturn Long-Term Performance Remains Steady
Stage 1 YR 3 YR 5 YR 10 YR 20 YR
Early Stage -12.2 -2.5 -0.4 -2.6 -1.3
Development -20.5 0.5 4.3 3.8 7.4
Balanced -23.6 0.6 2.1 0.2 3.0
All Venture -19.6 -0.6 1.8 0.2 3.0
Buyouts -31.0 3.5 10.8 11.6 12.9
Generalist -43.8 4.2 7.2 7.6 9.0
All Private Equity
-30.5 2.6 8.1 8.0 9.6
Source: Thomson Reuters/EVCA
European Private Equity Funds Formed 1980-2008Investment Horizon IRR (%) for period ending 31-Dec-2008
Mid-Size Venture Funds Seem Most Hit by the Crisis Formed 1980-2008
Stage 1 YR 3 YR 5 YR 10 YR 20 YR
$0-50 million -8.9 0.2 2.5 2.6 5.2
$50-100 million
-20.3 -1.8 0.4 0.3 2.9
$100-250 million
-25.7 -2.6 -0.5 -1.3 3.0
$250 million + -16.5 0.9 4.0 0.0 1.3
All Venture -19.6 -0.6 1.8 0.2 3.0
Source: Thomson Reuters/EVCA
Net IRRs to InvestorsInvestment Horizon IRR (%) for period ending 31-Dec-2008
These results refer to the fund size, not the deal size
On the Buyout Side - Mega Funds Most ImpactedFormed 1980-2008
Stage 1 YR 3 YR 5 YR 10 YR 20 YR
$0-500 million -16.7 6.6 10.0 12.2 13.9
$500 - 1 billion -15.4 10.4 10.9 19.1 19.6
$1 billion + -33.8 1.0 11.1 9.2 9.1
All Buyout -31.0 3.5 10.8 11.6 12.9
Source: Thomson Reuters/EVCA
Net IRRs to InvestorsInvestment Horizon IRR (%) for period ending 31-Dec-2008
These results refer to the fund size, not the deal size
Private Equity Investment During Downturns Generates Superior Performance
Net IRRs to InvestorsGrouped By Vintage Years From Inception to 31-Dec-2008
Stage 1980-1984 1985-1989 1990-1994 1995-1999 2000-2004 2005-2008
IRR DPI IRR DPI IRR DPI IRR DPI IRR DPI IRR DPI
All Venture 6.3 1.62 8.0 1.45 8.2 1.04 1.7 0.62 -2.5 0.22 0.7 0.03
All Buyouts 9.2 1.88 13.6 1.57 19.3 1.98 12.2 1.29 19.0 1.15 -18.7 0.11
Generalist 12.4 1.22 7.2 1.06 9.5 1.41 7.7 1.02 21.0 1.18 1.6 0.04
All Private Equity
9.3 1.32 8.5 1.19 15.3 1.66 9.7 1.15 13.0 0.96 -16.0 0.10
Source: Thomson Reuters on behalf of EVCA
Private Equity Returns Beat all Public Market Indices
Stage
European Private Equity
Return
Morgan Stanley Euro
Index
HSBC Small Company
indexJP Morgan Euro Bonds
Early Stage -1.3 -2.6 1.9 8.5
Development 7.4 3.1 4.9 8.8
Balanced 3.0 -1.1 1.4 7.6
All Venture 3.0 1.4 3.4 8.7
Buyouts 13.0 -4.6 2.1 9.1
Generalist 9.0 4.7 5.0 9.4
All Private Equity 9.5 -1.8 2.7 8.9
Comparators: annualised net pooled IRRs since inception to 31.12.2008
Source: Thomson Reuters/EVCA
Private Equity performance - superior to the performance of public market comparators
-5
-3
-1
1
3
5
7
9
11
13
15
2001
2002
2003
2004
2005
2006
2007
2008
IRR
(%
)
Morgan Stanley Euro Equity HSBC Small Company
JP Morgan Euro Bonds European Private Equity
Annualised net pooled IRRs since inception to 31.12.2008
*Comparators are Internal Rates of Return (IRR). IRRs for public market indices are calculated by investing the equivalent cash flows that were invested in private equity into the public market index. Then an equivalent IRR is calculated for each index.
Calculations based on methodology proposed by J Coller and published by A Long and C Nickles.
Source: Thomson Reuters/EVCA
9.5%
8.9%
2.7%
-1.8%
Summary
Mid- to Long-term performance Private equity registers close to 10% net IRR with pooled average top
quarter IRR since inception of 22.7% Private equity performance superior to the performance of all three
public market comparators
Shorter-term performance Reflects the impact of the economic downturn and financial crisis with
1-year horizon IRR at -30.5% Returns over the 3-year horizon also strongly affected by the
economic crisis with buyout IRR of 3.5% and venture IRR of -0.6%
2008 European Private Equity Performance Benchmarks
For questions please contact:
Thomson Reuters: [email protected]
EVCA: [email protected]