Hermes chief executive welcomes FSA’s review of private equity firms

Rod Selkirk, chief executive of Hermes Private Equity and chairman of the British Venture Capital Association, has welcomed the Financial Services Authority’s review of the private equity industry (see Fund Strategy, November 13, page 10).

Selkirk’s comments came during a speech to the all-party group for private equity and venture capital at the House of Commons last week.

The FSA is expected to release a feedback statement on industry regulation next summer, following a four-month consultation period.

Selkirk said: “The growth of the industry has increased its profile. With that comes an interest in what the industry is doing from the public, the press and the regulatory authorities.”

However, Selkirk also warned that “nothing” should be done to erode Britain’s position at the centre of the European industry.

Two reports by the BVCA were also published. The association’s Economic Impact Survey, updated for 2005-6, shows that employment in private equity-backed businesses grew at 9% per year in each of the previous five years. This compares with 1% growth for FTSE 100 firms and 2% for FTSE 250 companies.

Sales also grew at 9%, again faster than firms in the listed indices. Exports from the firms increased by 6%, against a national growth rate of just 2%.

The second report, which assessed the impact of private equity as a financial service, reveals there were more than 5,500 individuals employed in the British industry in 2005.

Private equity-related activities generated fee revenues for financial and professional services firms of more than 3.3bn, representing 7% of annual turnover in the financial services industry. The report also found that 50bn of foreign investment has flowed into British funds over the past six years.

Selkirk said it was “disappointing” to see such a large proportion of investment from overseas.