Private Equity Performance Shows Stability in Q2 2006

Concerns Remain for Future Performance in Light of Weak IPO Market

Oct 30, 2006, 00:00 ET from Thomson Financial from ,The National Venture Capital Association

    NEW YORK, Oct. 30 /PRNewswire/ -- Private equity performance showed
 stability in the short and long term for the period ending June 30, 2006
 according to Thomson Financial and the National Venture Capital Association
 (NVCA). Compared with the period ending Q1 2006, both the buyout and
 venture capital asset classes experienced modest declines in the one year
 returns and moderate improvements in the five year returns. Long term
 performance private equity performance remained steady and continued to
 outperform both the S&P 500 and NASDAQ for the ten and twenty year
     Short term performance showed a slight decrease with the one year
 venture capital returns posting a 16.2% return for Q2 2006 down from 19.2%
 in Q1 2006. Five year returns improved, but remained in negative territory
 at -3.5% up from -4.3% in Q1 2006. This negative return continues to
 reflect the aftermath of the tech bubble burst. Ten and twenty year returns
 remained steady at 20.8% and 16.5% respectively.
     "Since the tech bubble burst the venture capital community has been on
 the road to slow recovery. We are starting to see this recovery clearly in
 the five year performance numbers," said Mark Heesen, president of the
 NVCA. "For the last four quarters the five year return number has been
 steadily moving towards positive territory as the companies that survived
 and exited have begun to balance those that have failed. With this era
 largely behind us, our biggest concern now is the viability of the
 venture-backed IPO market, as long term performance for the venture capital
 industry is contingent upon a stronger, more receptive environment for
 taking these emerging companies public."
     One year buyout returns saw a very slight decrease as well posting
 27.3% for Q2 2006 compared to 28.3% for Q1 2006. Ten and twenty year buyout
 returns were relatively steady at 8.9% and 13.4% respectively.
     "The returns for this asset class are coming under increasing pressure
 created by the record commitments over the last two years. With no end in
 sight to the supply of new capital from institutional investors looking to
 diversify a larger percentage of their portfolios into alternative assets,
 time will tell if the short-term downward pressure on returns is an
 indication of a saturated market, or if indeed, opportunistic GPs can find
 a way to create a disruptive release that will continue to deliver long
 term returns well in excess of public markets," said Darrell Pinto,
 Director of Global Performance at Thomson Financial.
     Thomson Financials' US Private Equity Performance Index (PEPI)
     Investment Horizon Performance through 06/30/2006
     Fund Type                                1 Yr   3 Yr   5 Yr  10 Yr  20 Yr
     Early/Seed VC                           11.20   5.40  -7.60  36.90  20.50
     Balanced VC                             20.50  12.50  -0.20  17.00  14.50
     Later Stage VC                          16.40   9.40  -1.10   9.50  13.70
     All Venture                             16.20   9.00  -3.50  20.80  16.50
     Small Buyouts                           12.10   9.60   3.70   7.10  25.90
     Med Buyouts                             21.50  11.80   5.00  11.10  16.10
     Large Buyouts                           26.80  15.80   6.30   8.60  12.50
     Mega Buyouts                            28.50  17.50   7.20   8.90  11.60
     All Buyouts                             27.30  16.30   6.60   8.90  13.40
     Mezzanine                                9.70   5.30   2.60   6.20   8.70
     All Priv Equity                         22.50  13.40   3.60  11.40  14.20
     NASDAQ                                    5.6   10.2    0.0    6.2   11.7
     S & P                                     6.6    9.2    0.7    6.6   9.79
     Source: Thomson Financial/National Venture Capital Association
     * The Private Equity Performance Index is based on the latest quarterly
       statistics from Thomson Financials' Private Equity Performance Database
       analyzing the cashflows and returns for over 1862 US venture capital and
       private equity partnerships with a capitalization of $679 billion.
       Sources are financial documents and schedules from Limited Partners
       investors and General Partners.  All returns are calculated by Thomson
       Financial from the underlying financial cashflows.  Returns are net to
       investors after management fees and carried interest.  Buyout funds
       sizes are defined as the following: Small: 0-250 $Mil, Medium: 250-500
       $Mil, Large: 500-1000 $Mil, Mega: 1 Bil +
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     The National Venture Capital Association (NVCA) represents
 approximately 480 venture capital and private equity firms. NVCA's mission
 is to foster greater understanding of the importance of venture capital to
 the U.S. economy, and support entrepreneurial activity and innovation.
 According to a 2004 Global Insight study, venture-backed companies
 accounted for 10.1 million jobs and $1.8 trillion in revenue in the United
 States in 2003. The NVCA represents the public policy interests of the
 venture capital community, strives to maintain high professional standards,
 provides reliable industry data, sponsors professional development, and
 facilitates interaction among its members. For more information about the
 NVCA, please visit

SOURCE Thomson Financial; The National Venture Capital Association