EUROPE- Returns from private equity in Europe were hit in 2001 according to a recent study which estimates an internal rate of return (IRR) in 2001 of -2.3% for all classes. The study, undertaken by the European Venture Capital Association and Venture Economics, the private equity information provider, covers a total of e107bn in committed capital in 649 funds.

Preliminary results from the survey found that every investment stage saw a decrease in their respective IRR with the main drop in early stage investment which fell 8.9% last year. For development and buyout investments, one-year returns -while positive at 11.4% and 2.2%- were inferior to long-term returns, a respective 13.8% and 18.7% in the ten years to the end of 2001.

The survey says that lower company valuations, led by the technology sector, difficulties in exit routes and a weak European economic climate contributed to lower returns.

Results are more encouraging over a longer horizon and the survey estimate that in the ten years to the end of 2001, private equity as a whole has an IIR of 16.5%.

Says Max Burger-Calderon, chairman of the EVCA investor relations committee: “the findings show us the clear impact of the economic environment on short term returns. No doubt this difficult year has supplied many valuable lessons to private equity practitioners.

“The results published today also confirm the long-term robustness of the European private equity asset class to weather storms and to produce sustained returns throughout economic cycles.”


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