Investors that have shirked private equity funds in favour of venture capital trusts (VCTs) could be kicking themselves in the wake of new findings.

According to accountant UHY Hacker Young, UK private equity has generated an average annual return of 18.7 per cent in the last decade. The figure is some nine times the 2.1 per cent returned by VCTs, based on stats from the British Venture Capital Association and Allenbridge Group.

UHY Hacker Young’s tax manager Rob Durrant-Walker said: “Because VCTs invest in smaller companies they are carrying a lot of risk. So far that risk hasn’t meant better returns.

“While the tax breaks they offer are attractive these latest figures demonstrate that their returns are lagging behind private equity returns as a whole.

“The exposure of private equity funds to small companies will vary but on aggregate they will have a greater exposure to more mature and stable companies.”