Long-Term Private Equity, VC Steady

Long-term performance in venture capital and buyouts remained steady, while both were more volatile in the short term, according to Thomson Venture Economics and the National Venture Capital Association. Over a 20-year period, VC and buyout funds saw annualized returns of 16.5% and 13.3%, respectively. In the short term, however, VC returns varied wildly, jumping from 7.8% in the second quarter of 2005 to 32.5% in the third quarter, while buyout funds were a little more consistent, moving from 26.9% in Q2 to 32.5% in Q3.

"Measuring venture capital performance is like watching the Tour de France" bicycle race, says Mark Heesen, president of NVCA, in a statement. "It is a long term event that can't be analyzed by looking at short-term developments. As an industry, we are heavily focused on the 10- and 20-year returns because those are the numbers that are ultimately analyzed." The massive jump in the third quarter, according to the group, is the result of increased exit-market activity. Incidentally, Private Equity Intelligence predicts that global p.e. fund raising in 2006 is expected to break the record $261 billion last year.