Buyout funds delivered the best performance of any category of private equity vehicle last year with a long-term average internal rate of return of 15.9 per cent, according to the State St
Buyout funds delivered the best performance of any category of private equity vehicle last year with a long-term average internal rate of return of 15.9 per cent, according to the State Street Private Equity Index, which is based on quarterly statistics from State Street Investment Analytics’ Private Edge Group.
The group provides analysis of private equity investments for a client base including public and private pension schemes, endowments and foundations with more than 4,000 commitments totalling more than USD160bn. The Private Edge Group private equity data sets include partnership information down to portfolio company level.
The 634 buyout funds with commitments of USD852bn included in the index delivered a long-term IRR of 15.9 per cent, while 614 venture capital funds with commitments of USD206.4bn had an average IRR of 12.8 per cent and 173 funds of other types with commitments of 146.8bn averaged 13.8 per cent.
Exclusively US-focused funds suffered by comparison with those investing only outside the country. While 1,175 US-only funds with USD1.21trn achieved an average IRR of 14.2 per cent, the 246 international funds with commitments of USD942.1bn included in the index had a long-term IRR of 21.2 per cent.
‘Mega buyout funds continue to deliver higher long-term IRRs as a whole than their smaller peers and other segments, such as venture capital,’ says State Street vice-president Gerard J. Labonte. ‘Investors with access to the largest buyout managers have fared quite well against the rest of the asset class and in comparison with public market equivalents.’
Noting the impact of the credit crunch and a corresponding slowdown in deal flow, Labonte says: ‘The asset class saw continued pressure on valuations, especially in US markets. However, continued US dollar weakness partially offset this effect for those invested in overseas opportunities.’
State Street Investment Analytics provides performance and analytics services for more than 1,200 clients on asset volumes exceeding USD5.5trn through offices in Alameda, Amsterdam, Boston, Dublin, Edinburgh, Frankfurt, Hong Kong, London, Luxembourg, New York, Paris, Sydney, Toronto and Zurich.
The Private Edge Group provides analyses of customers’ private equity portfolios through an automated web-enabled environment and offers services ranging from performance measurement to complex quantitative and qualitative portfolio analysis.
