In an era characterized by economic uncertainty and volatile markets, the Finnish venture capital (VC) and private equity (PE) landscape has stood firm, delivering exceptional returns and solidifying its position as a robust investment avenue. The latest survey conducted by Tesi, Finland’s state-owned investment company, sheds light on the performance of Finnish VC and PE funds, showcasing their outperformance of listed shares and their unwavering resilience in challenging times. These results highlight the industry’s ability to navigate turbulent waters and generate impressive returns for investors.
Tesi’s annual survey has become a benchmark for investors and industry stakeholders seeking accurate insights into the Finnish VC and PE market’s performance. This year’s survey, comprising 44 funds raised between 2009 and 2020, presents a comprehensive analysis of both mature and new funds, showcasing their individual achievements and market position.
“Generally speaking, distributed investing in Finnish venture capital and private equity funds over the last fifteen years or so has generated better returns than investing in the listed equity market,” says Matias Kaila, Tesi’s Director, Fund Investments.
The survey reveals that both mature and new Finnish venture capital funds have demonstrated exceptional performance. Mature funds, which commenced between 2009 and 2015, have generated an impressive annual return of 22%. This performance has been consistent over the past few years, maintaining a Total Value to Paid-In (TVPI) ratio of 2.9x despite the prevailing market uncertainties. Furthermore, these funds have almost doubled their distributed capital, with 1.3x DPI, indicating the realization of significant gains.
Comparing Finnish venture capital funds to their European peers, the survey highlights their superiority in terms of overall returns and capital distribution. Over half of the mature Finnish VC funds are in the first quartile, surpassing their European counterparts. Notably, in 2022, Finnish VC funds outperformed their European peers in terms of capital distribution, with over 65% of total capital positioned in the upper quartiles.
The distribution of returns among mature VC funds also portrays their robust performance. Though return dispersion has narrowed from the previous year, the distribution remains relatively high. This emphasizes the influence of individual fund investees on the overall returns, a characteristic inherent to the venture capital asset class. The median TVPI for older VC funds stands at an impressive 2.1x.
“Around one-half of the investment funds that started operating after the financial crisis now rank amongst the best performers in the European league, measured by annual returns,” comments Jens Färm, Tesi’s Investment Associate, who compiled the survey of returns.
In comparison to the listed market, Finnish venture capital funds have demonstrated their strength. PME analysis, which indexes cash flows against the public stock market, reveals an increase from 1.76 to 1.84 in the PME for established VC funds. Although the rise may appear modest, it reflects the market’s swift correction compared to the more gradual adjustment observed in the private market.
The survey also presents encouraging results for new Finnish venture capital funds formed between 2016 and 2020. These funds have achieved an impressive annual return of 19%, surpassing the performance of listed shares. With a TVPI of 1.5x and a strong potential for value appreciation, these funds demonstrate promise for future returns.
In comparison to their European peers, new Finnish VC funds have also fared remarkably well. Approximately 75% of these funds fall within the first and second quartiles, indicating their strong performance and potential for future growth.
As Finnish venture capital and private equity funds continue to deliver impressive returns, investors and industry stakeholders should pay close attention to this thriving investment landscape. These funds’ ability to weather market storms and generate consistent returns highlights the importance of diversification and a long-term perspective in building a successful investment portfolio.
Moving forward, the Finnish venture capital and private equity market will likely maintain its strong position, attracting investors seeking high-growth opportunities and superior returns. The results of this survey underscore the significance of the Finnish investment ecosystem and its continued contribution to the country’s economic growth and innovation.
Click here to see Tesi’s survey results.
