Private equity firms' returns from investing in European buyouts have beaten the European stock market index over the last 10 years, according to data from Thomson Reuters. Returns from all buyouts beat the Stoxx 600 Index Total Return, when measured over 1-year, 3-year, 5-year and 10-year investment horizons, data released on Tuesday showed.
Deals to take control of companies - by private equity funds smaller than $400 million to bigger than $5 billion in size - returned 6 percent for the 12 months to end June, compared with a -4.5 percent total return for the Stoxx 600. Over 10 years, buyouts gave returns of 9 percent, according to the Thomson Reuters European Private Equity Performance Index, against a 3.7 percent total return for Stoxx 600. Buyout firms aim to deliver superior returns to listed equities by buying companies, improving them and selling them for vast profits.
Investors with private equity firms, such as pension funds or fund of funds, typically hope that buyout investments will beat listed equities by about 5 percentage points. However, venture capital investments in European start-up companies, which can be higher risk than buyout deals, gave weaker returns. Venture capital delivered just 0.6 percent for the 12 months to end June, and -1.4 percent over 10 years. The Private Equity Performance Index is based on the latest quarterly statistics for over 1,395 European venture capital and private equity funds worth 332.9 billion euros.
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