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PitchBook Benchmarks reveals slowing private equity distributions

Drawdown rates for private equity funds are slowing, with managers taking longer to call down funds than they have in the past, according to data released by PitchBook from its PitchBook Benchmarks performance measurement product.

PE funds historically have called down more than 80 per cent of commitments by the end of their fourth year, but that has slipped to just 77 per cent for 2012–2015 vintage funds.
Venture capital funds, meanwhile, are deploying capital faster than ever. The average fund raised in the early 2000s called down less than 60 per cent of capital commitments by its third year, but that has steadily increased to more than 70 per cent for more recent vintages.
PitchBook’s data is designed to help limited partners (LPs) and general partners (GPs) better understand private market fund performance relative to broader asset classes and other PE and VC strategies. Since its initial launch in December 2017, PitchBook Benchmarks has added more than 150 private capital funds, on top of the existing 3,000-plus fund vehicles included in the Benchmarks data set. In this edition, PitchBook Benchmarks uncovered that GPs have adapted their strategies to meet the new realities of the high priced private market. Newer venture funds have deployed and distributed capital at a faster clip than ever before, while PE investors have slowed their pace of drawdowns due to factors including an abundance of alternate sources of capital, as well as the need to keep more capital on hand to support add-on transactions.
“In today’s private capital markets, the unprecedented amount of capital available has fuelled competition, pushing valuations and deal sizes to the highest point in the last decade. The evolving market dynamics have caused fund timelines to accelerate for venture capital, while private equity has seen a slowdown,” says James Gelfer, senior analyst at PitchBook. “These shifts in strategy can manifest themselves in returns, making fund performance data more important than ever as LPs make tough allocation decisions and GPs measure performance against peers.”

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