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BVCA Private Equity and Venture Capital Performance Measurement Survey 2011 39
Appendix IV – Range of returns (IRR) medium to long term
This appendix shows the Range of returns
(under the IRR metric) over the longer term –
three-, five- and ten- year periods. The Range of
returns ‘since inception’ is the most appropriate
measurement for private equity and these are
shown on pages 21–29 of the main report.
It is important to note that the shorter the time
period measured, the more volatile the returns
are likely to be. The most probable cause of
extreme numbers is the realisation of assets
at prices that differ significantly from previous
valuations. The more extreme numbers are
likely to occur where the time period measured
is short, or where funds in older vintages realise
their last remaining assets from a small residual
carrying value.
Put simply, an investment with an original cost
of £1 might be valued at £0.50. If the investment
subsequently failed, the loss of £0.50 of value
would record as -100% over whatever time
period was measured. If the investment had
been sold at cost, say nine months later, the
return in the period would be in excess of
150% on an annualised basis.
It should also be noted that the ‘Pooled average’
return in the ‘Total’ column in the following
tables is the return for all funds that were in
existence at the beginning of the measurement
period (e.g. the ‘pooled average’ return for funds
over five years is calculated by measuring the
aggregate performance of all funds that were
in existence on 1 January 2007 for the five-year
period from 1 January 2007 to 31 December
2011. This differs from the medium- to
long-term return tables, which calculate the
five-year returns on all funds in the survey
at 31 December 2011, regardless of their vintage
year. The same principle applies to the three-
and ten-year returns.
The top and bottom deciles are excluded from
the range to produce a range that excludes
outliers. This is known as the ‘interdecile’ range.
Where there are fewer than ten funds in a sample,
the 10th and 90th percentile are denoted n/a
(not applicable) in the following tables.