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Buyout funds remain buoyant as uncertainties persist

Buyout funds continued to display resilient performance during a turbulent Q1 of 2023, according to research by Neuberger Berman, with small and mid-cap buyout funds, the largest asset class in the sample, up approximately 3% on average over the quarter. 

Buyout funds continued to display resilient performance during a turbulent Q1 of 2023, according to research by Neuberger Berman, with small and mid-cap buyout funds, the largest asset class in the sample, up approximately 3% on average over the quarter. 

Buyout funds as a whole – including traditional buyout, value buyout/turnaround, and growth buyout/growth equity strategies – were up more than 2% on average in Q1, both in US dollars and reported currency.

Even though many listed equity markets climbed strongly in the opening quarter, with the S&P 500 up 7.5%, listed markets remained underwater over the 12 months to the end of the first quarter. For example, the S&P 500 total return index was down nearly 8%, while the Russell 2000 and Nasdaq were down more than 11% and 13% respectively. In contrast, the average buyout fund was up more than 1% over this 12-month period.

The picture is less rosy for venture capital funds, where the valuations of high-growth companies – especially in technology sectors – were impacted by higher rates and declining multiples. On average, the venture funds in the sample were up nearly 2% in the first quarter, but this was buoyed by the positive performance of funds still holding the public stock of companies that listed in recent years. The median venture fund decreased in value by 0.2% in Q1 2023, on the heels of four consecutive negative quarters in 2022.

Prior to the market downturn, the venture funds in the sample experienced incredibly strong performance, with average annual increases in value of 37% in 2020 and 47% in 2021, respectively – far outpacing other public and private asset classes during the two-year period. But over the last 12 months, the average venture fund in the sample was down 12%. Interestingly, this is very close to the 13.3% decline in the Nasdaq total return index over the same period. But while the Nasdaq ended the calendar year 2022 down 33%, the average venture fund was down only half as much, at -17%.

Managing more than $115bn in private market assets, Neuberger Berman can access valuation information for more than 400 active private equity funds. Each quarter, the NB team analyses valuation changes as soon as updated marks are received.

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