Why is it that private equity-managed companies do better? Williams says it boils down to control.

'A good management team is essential. It is not true that private equity comes in and asset-strips. A good team runs a company for the long term, if only because it wants a good exit. It is about value creation. They control the cash flow and this is ultimately why they outperform, although they also have the power of selection [of the businesses they buy] in the first place.'

SVG is primarily interested in buyouts as opposed to venture capital, with a few exceptions in life sciences: 'In my view, venture capital is too volatile for private investors,' says Ferguson. More specifically, SVG is interested in Permira-executed buyouts that have included New Look, Vendex (the Dutch retailer also backed by KKR which ex-Asda boss Tony De Nunzio is joining), Travelodge and the AA.

A fortnight ago the relationship between the two companies was formalised. Permira's managing partner Damon Buffini has a seat on the SVG board, Permira now owns 6m shares (bought at £6) and its investments represent 75-80 per cent of the SVG portfolio at any one time.

'If you don't like Permira,',laughs Ferguson, 'stay away from SVG. But we think they are a great team with a good track record.'

Ferguson and Williams worked alongside many of those people when they were at Schroders, which gave birth to Permira. Permira now accounts for 90 per cent of SVG's profits.

They say that the key to making a return on investment is no longer primarily through releveraging a business and/or price arbitrage - 'wouldn't we all like to buy low and sell high all the time?' - but is about increasing earnings. 'With Homebase they [Permira] focused on the softer end of DIY and cut out the huge centres they were beginning to build; at Travelodge they sent in people to measure everything from check-in time to the time it took to get room service. They found that Travelodge was behind in all but four and so they improved it.'

Williams says that this level of control means they can act fast. Plus they can give management more incentives by making them owner-managers who will benefit to the tune of tens of millions if they deliver.

'Privately owned businesses do not have to be responsible to analysts,' says Ferguson. 'They can take on the costs of change. They can pursue the strategy that has fallen out of favour but is right for the business. They can also take higher debt levels privately than analysts would be happy with in the public arena.'