Private equity and venture capital investment in Australian businesses offer better yield than shares over the long term, StartupSmart reported quoting a new report.
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The index, by the Australian Private Equity & Venture Capital Association and investment advisors Cambridge Associates, shows private equity provided returns of 6.88% and 2.83% over three and five years, while the S&P/ASX 300 share market index produced returns of 2.8% and -1.81% respectively.
However, shares outperformed private equity returns in the year to 31 December 2012, with the S&P/ASX 300 jumping by 19.74%, while private equity gained 5.78%, StartupSmart report said.
AVCAL chief executive Katherine Woodthorpe told StartupSmart that private equity and business made good partners because both were focused on long term outcomes.
"They can implement strategies which may be in the short term detrimental to the bottom line but better overall," she added.
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By GlobalDataAccording to Woodthorpe, private equity investment activity ranged from $500,000 capital injections to multi-billion dollar takeovers, with the bulk of activity involving companies worth between $20 million to $300 million.
Private equity was good at improving the operational performance of a company and would help business owners with strategy because they "have skin in the game," She added.
