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36 BVCA Private Equity and Venture Capital Performance Measurement Survey 2011
Appendix II – Glossary of terms
Continued
Principal comparators
The principal comparators are the FTSE UK
Equity and FTSE World and Europe (ex-UK)
Indices and the UK Equity, Overseas Equity
and total assets returns of the WM All Funds
Universe. The figures are detailed in Appendix
III of this report.
Range of returns: quartiles/deciles/percentiles
The ‘Range of returns’ represents the results
of a universe of portfolios constructed for the
purposes of comparing performance. Within
each range, a portfolio’s results are defined in
terms of a percentile ranking. Ranges can be
subdivided by quartiles, deciles and percentiles.
The range between the tenth and ninetieth
percentile is known as the ‘interdecile’ range.
Top decile
Tenth percentile – 10% of the funds have an
equal or higher return than this value.
Upper quartile
Twenty-fifth percentile – 25% of the funds have
an equal or higher return than this value.
Median
Fiftieth percentile – The return of funds in the
middle of the ranking.
Lower quartile
Seventy-fifth percentile – 75% of the funds have
an equal or higher return than this value.
Bottom decile
Ninetieth percentile – 90% of the funds have an
equal or higher return than this value.
Pooled average
IRR or return for the total sample of funds
being analysed.
Return
The annualised internal rate of return (IRR)
achieved over a period of time, based upon the
portfolio cash flows and valuations. The cash
flows used in the calculations are the total
actual fund cash flows and the returns are
therefore time-weighted and money-weighted.
This type of calculation is often referred to
as ‘time line basis’ (see also Methodology
‘Calculation of Return’).
Total return
Aggregate of all cash flows.
Universe
A group of similar portfolios assembled to
provide a benchmark against which the
performance of an individual portfolio may be
compared. Any such universe should comprise
portfolios with similar investments and objectives,
and the same domicile and tax status.
Valuations
This refers to the assessed value of the unrealised
part of the portfolio, which is assumed to be
realised at 31 December 2011 in the final return
calculation. This assessment is carried out in
accordance with the International Private Equity
and Venture Capital Valuation Guidelines.
Vintage year
Year of first closing of the fund, that is, the year
in which a fund has raised an initial sum of
money with which to commence its investment
programme.
WM All Funds Universe
The WM All Funds Universe is the largest
available universe of UK pension funds.
It represents some two-thirds of the UK
defined benefit pension industry by value.
Weighted average (Principal comparators)
The aggregate returns of a number of like
portfolios, the results of which are used for
comparing performance. The weighted average
for a number of portfolios is calculated by
weighting each individual portfolio’s return
by the proportion (by the average value of
investment over the period) of the combined
total that it represents.