Private equity investment returns double

Last updated 14:19 19/11/2012
franceska banga
CHANGES URGED: Francesca Banga wants KiwiSaver rules changed to encourage more venture investment funding.

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Money put into local companies by private equity funds more than doubled in value during the time it was invested, according to a Government fund manager.

New Zealand Venture Investment Fund has published research showing the $1.36 billion invested by New Zealand and Australian private equity funds into 90 companies over an 18-year period delivered a return of $2.85b .

Breaking it down, that means for every dollar invested in New Zealand companies, $2.10 was returned on those investments.

"These returns clearly show that investing with professional private equity fund managers delivers excellent returns on investment on a consistent basis," said Franceska Banga, head of the state-owned fund-of-funds investor, which manages over $200m.

Still, the numbers need to be treated carefully, given that they do not take into account fees or unrealised investments.

The latter is particularly important as it suggests the data only looked at the success stories and ignored underperforming assets that are still sitting on the books of PE firms.

Other findings from the study included:

- The average deal size was $14.2m, with the largest deal being over $200m and the smallest being around $1m.

- The annual rate of return on these private equity investments was 33.7 per cent.

- 39 per cent of investments earned more than double what was invested, and 7 per cent earned over five times what was invested.

Banga said the returns demonstrate the scale of opportunity that exists in the New Zealand market.

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