The quarter ending 31 March, 2011, was the eighth in a row to yield positive returns for private equity and venture capital funds, according to Cambridge Associates LLC. Private equity continued to outperform venture capital over the five- and 10-year periods ending 31 March, while the situation remained reversed for the 15- and 20-year periods ending on the same date, with venture capital far out-distancing private equity.
Both fund types underperformed the public markets during the first quarter but continued to generate significantly greater returns than the public markets over the longest time horizons measured by the benchmarks.
The private equity index benefited from solid public market returns and rising commodity prices, which boosted company-level performance. Venture capital returns were aided in large part by an improving exit environment and continued enthusiasm for technology, the index’s largest sector by weight. Both fund classes generated lower returns for the first quarter than they did in the quarter prior. Private equity funds earned 5.4% for the quarter, vs. 7.6% in the final quarter of 2010; venture capital earned 5.0%, vs. 8.4% for the prior quarter.
Over the 10-year period ending March 31, private equity funds earned 10.8% and venture capital -0.1%. The 10.9% spread between these returns was almost a full point less (down from 11.7%) than the prior quarter. The venture capital return for the period, while negative, was up sharply from the -2.0% return for the same length period ending December 31, 2010, and it was a full 4.5% improvement over the low point for the 10-year venture capital return, which was reached during the quarter ending September 30, 2010.
Cambridge Associates provides independent research and investment advice to institutional investors and private clients and publishes a quarterly commentary on the performance of private equity and venture capital as measured by the Cambridge Associates LLC U.S. Private Equity Index® and the Cambridge Associates LLC U.S. Venture Capital Index®. The funds included in the indices represent the majority of the institutional capital raised by private equity partnerships between 1986 and 2010 and venture capital partnerships between 1981 and 2010.
