Private equity returns 33.5pc

NZVIF chief executive Franceska Banga. Photo / Supplied

Private equity investments in this country between 1994 and 2010 had an annual rate of return of 33.5 per cent, according to a new study.

The research, carried out by the New Zealand Venture Investment Fund (NZVIF), analysed investments made by New Zealand and Australian private equity funds in companies in this country during the 16-year period.

It found that for every dollar invested, $2.54 was returned on those investments, with the $675 million invested between 1994 and 2010 earning $1.72 billion, before management fees and costs were accounted for.

Returns on investments were positive across the full period, although highest between 2000 and 2008.

NZVIF chief executive Franceska Banga said that, of the 74 investments, 30 earned more than double the amount invested and six earned more than five times the amount.

Twenty investments earned less than the amount invested, demonstrating the importance of a wide portfolio of investments.

New Zealand institutional investors had, traditionally, been reluctant to invest into New Zealand private equity, but the study showed there was considerable opportunity to achieve high-quality returns.

New Zealand Private Equity & Venture Capital Association chairman Kerry McIntosh said the new research should help fund managers attract investors.

"Private equity fund managers do create real value for investors. They do this by taking an activist approach to improving corporate operations across a diverse range of companies and industries," which included investing new capital, employing more people and increasing sales.

With the vast majority of major New Zealand companies in private ownership, private equity offered investors an opportunity to gain exposure to a large sector of the economy that traditionally had been difficult to access, he said.

- NZPA