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Private Equity has a long history of out-performing most other asset classes, delivering superior returns to LPs for many years.
The recent fear has been that the December 31st 2008 valuations, with the full impact of FASB 157, would see major writedowns that could take back much of PE’s previous out-performance.
Preqin has completed a major analysis of December 31st fund valuations, incorporating data from 361 separate private equity funds of all types, sizes, and from a range of vintage years. Key findings include:- The average PE fund declined by 17% during 2008 – a major decline by PE’s previous stellar standards, but not as bad as many feared, and still well ahead of and out-performing other asset classes – e.g. S&P 500’s 37% decline
- As usual in private equity, there was a wide range in performance across funds:
- 14% of funds were especially badly hit, with valuations down 40% or more (i.e. similar to S&P 500)
- 19% of PE funds actually saw valuations increase in 2008, despite the global recession
- Venture funds fared relatively well, with a decline of only 11%
- Buyout funds were harder hit, with average declines of 22%, but big differences across fund sizes:
- the smallest funds ($500mn and below) which use relatively less leverage, escaped relatively unscathed, with valuations down only 8%; conversely, the biggest funds ($7bn and above) were hit harder, with valuations down 35%
Please visit this link to see the full analysis: www.preqin.com/go.aspx?lid=886
Comment:
“Private equity has had an amazing long-term record of great returns. Many commentators feared that the December 31st results would change this forever. Preqin never subscribed to that view, so it’s good to see the analysis confirm just how robust private equity has been during the downturn: keeping the average loss down to 17% during 2008 would be the envy of many investors. Some funds have been hit harder – especially the biggest buyout funds and real estate funds – but investors with well-diversified private equity portfolios have weathered the storm well, and are looking forward to great returns in the years ahead.”
Mark O’Hare, Managing Director, Preqin
