The last 12 months have been a banner year for venture capital funds, achieving internal rates of return of almost 26 per cent and far ahead of other forms of private equity, possibly suggesting a renaissance after years in the doldrums.

The last 12 months have been a banner year for venture capital funds, achieving internal rates of return of almost 26 per cent and far ahead of other forms of private equity, possibly suggesting a renaissance after years in the doldrums.

According to figures issued for 2014 by Preqin, the research firm, venture capital has set the fastest gains in terms of one-year rolling internal rates of return of 25.9 per cent. Emboldened by these improving returns, some 26 per cent of investors polled by Preqin said they intend to commit to VC vehicles in 2015, up sharply from 15 per cent taking this view a year ago. For all categories, such as buyout funds, the IRR on a rolling basis was 22 per .cent.

Improved VC returns could, if sustained, particularly appeal to long-term investors such as family offices where time horizons for this illiquid asset class can be measured in decades rather than years or quarters. A sustained improvement in returns from this asset class could see it gain new adherents in markets such as Asia. The performance of VC is notable also when set against total returns from public equities. The MSCI World Index of developed countries' equities set total returns (capital growth added to reinvested dividends) of 4.94 per cent. (Such a measure is not stricly comparable with a IRR measure as the later takes account of the timings of deals.)

Combined assets of the private equity and venture capital sectors reached a record of $4.8 trillion in 2014, up 11.9 per cent from the year before, Preqin said.

“Dry powder” – unused capital waiting to be put to work – stood at $1.2 trillion at the end of last year; aggregate capital raised in the sector was $495 billion, Preqin said.

Last year the biggest buyout deal was the $11.53 billion Tim Hortons add-on in August by 3G-backed Burger King, while the biggest VC deal was when taxi-request firm Uber Technologies received $1.2 billion in series D financing in June and a further $1.2 billion in series E financing in December.

By far the biggest VC exit last year was the $25 billion initial public offering of Chinese e-commerce giant Alibaba, while the trade sale of Alliance Boots GmbH, to Walgreen, for $15 billion, was the largest private equity exit.