ACCA Advanced Financial Management (AFM) Practice Exam

According to NVCA, what was the average return to investors over 25 years up to 2010?

1. 10% after expenses

2. 15% after expenses

3. 19% after expenses

4. 25% after expenses

The correct answer is: 19% after expenses

The average return to investors over 25 years up to 2010, according to the National Venture Capital Association (NVCA), being reported as 19% after expenses reflects the robust performance of venture capital investments during that period. This return highlights the potential for high rewards in venture capital, which is known for investing in startups and high-growth companies. While it’s common for various investment strategies to yield lower returns due to market fluctuations and risks, venture capital tends to provide higher rates of return due to its positioning in early-stage companies that can achieve exponential growth. Furthermore, successful venture capital firms have the potential to significantly outperform more traditional investment avenues. The stated return of 19% indicates a combination of both the successful capital gains from high-performing investments and an understanding of investor expectations in this high-risk, high-reward investment area. Additionally, noting that this figure is given after expenses implies that the measurement accounts for management fees, carried interest, and other associated costs, making it a more realistic reflection of actual investor returns over that time frame.