Embargoed until 5pm, 3 November 2010
Private equity investment returns more than double
Private equity in New Zealand returned $1.72 billion on investments of $675 million between 1994 and 2010, according to
new research undertaken by the New Zealand Venture Investment Fund.
The research analysed investments made by New Zealand and Australian private equity funds into New Zealand companies
over the last 16 years. Eleven funds invested $675 million was invested into 74 companies. The research measured the
value of the returns following the realisation of those investments.
The key findings include:
• For every dollar invested in New Zealand companies, $2.54 was returned those investments. The $675 million
invested between 1994 and 2010 earned $1.72 billion, before management fees and costs are accounted for.
• The IRR (annual rate of return) on these private equity investments in New Zealand over the period was 33.5%.
• 40 percent of investments earned more than double what was invested, and 8 percent earned over five times what
was invested.
• Returns on investments were positive across the full period, although, as expected, were highest during the
period from 2000 through to 2008.
NZVIF chief executive Franceska Banga says this analysis, the most comprehensive review of New Zealand private equity
investment, confirms that over the last 16 years, investment in privately owned New Zealand companies has been a rich
source of growth and investment returns.
“The research looks at returns over a 16 year period, which provides a significant sample taking account of business
cycles. These returns clearly show that investing with professional private equity fund managers delivers excellent
returns on investment on a consistent basis.
“Of the 74 investments, 30 earned more than double what was invested, with six investments earning over five times what
was invested. With 20 investments earning less than what was invested, it demonstrates how important it is to have a
wide portfolio of investments where, on average, the good returns will more than compensate for poor performing
investments.
“Even accounting for ‘survivor bias’ – managers holding onto poorer investments - and taking account of fees, it is
clear that private equity investment has been a consistently high performance asset class across a wide range of
professional fund managers who have been actively selecting and investing into New Zealand companies
“These returns provide compelling reasons why New Zealand private equity is a good investment class. New Zealand
institutional investors have, traditionally, been reluctant to invest into New Zealand private equity. These results
show that there is considerable opportunity to achieve high quality returns.
“The returns confirm a strongly held article of faith for the private equity industry: investment discipline - taking a
strict portfolio approach across sectors and consistently over time - together with an active approach to managing
investments, pays off.
“Investing in private equity enables investors to gain access to a large number of very well performing companies which
are private owned.”
ENDS