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Performance data for the private equity industry as of 31st December 2009 is now in. The results reveal that private equity performance is improving, with returns and fund valuations up from Q3 2009. Compared to public indices, private equity is still performing well over the longer term but is outperformed over the one-year period.
Preqin’s industry-leading Performance Analyst product is now showing net-to-LP data for a landmark 5,000 individual funds, representing 65% of all funds ever raised in terms of value.
Key findings of the research include:
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Moving to positive territory, PE performance over a one-year period to December 31st 2009 (13.8%) represents a significant improvement compared with one-year performance to September 30th 2009 (-9.2%).
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The one-year performance of PE to December 31st 2009 (13.8%) falls behind public markets (S&P 500 (26.5%), MSCI Europe (35.8%) and MSCI Emerging Markets (78.5%).
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Over a longer time period, PE performance is outperforming most public markets – over three years returning 0.3% (beating the S&P 500 and MSCI Europe, but falling behind the MSCI Emerging Markets), and over five years returning 17.5% (beating all public indices examined here).
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By fund type, buyout funds are posting the highest returns over the one-year period to December 31st 2009, returning 16.7%. This represents a significant improvement from one-year figures to September 30th 2009 which were in the red at -11.2%. As at Q4 2009, venture capital shows a one-year return of 5%, mezzanine 2.3% and fund of funds 0.2%.
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In terms of fund net asset value (NAV), PE funds showed an increase in NAV of 13.5% over the course of 2009. This compares very favourably to the 15.8% decrease recorded in 2008. The net asset value for buyout funds increased by 15.5% in 2009. Mezzanine saw their NAVs increasing by 8.4% over the year and venture capital by 4.0%.
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There has been a continuation in the quarter-on-quarter improvement in NAV which started in Q2 2009. There was a 5.4% increase in the weighted net asset value for all private equity funds between Q3 and Q4 2009.
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Median returns for 2005 vintage and older buyout funds are now all in positive territory, with 2006 vintage and onwards median returns still in the red. With the 2006 vintage having already seen its median net multiple improve dramatically over the course of 2009 (from 0.76x in March 2009 to 0.89x in December 2009), there is a strong possibility that we will see median returns for the 2006 vintage year moving back into the black in the coming quarters.
To access the full report, please visit: www.preqin.com/Q42009PerformanceReport
Comment:
“Private equity managers had to significantly mark down their portfolio companies in 2008, resulting in substantial decreases in NAVs and negative short-term returns. Company valuations and performance started to improve from the second quarter of 2009 and the industry has since continued its recovery. The release of December 2009 data confirms that private equity performance is still improving at a fast rate as the one-year horizon IRR turned positive again and fund valuations continued to increase strongly in the last quarter of 2009. Although the 2006 buyout vintage was heavily affected by the global downturn and is still showing negative median returns, we have seen a significant improvement in performance, and there is now a strong possibility that it will move into positive territory in the coming months. Preqin now holds transparent, net-to-investor performance data for over 5,000 private equity funds, enabling us to provide the most comprehensive and unbiased assessment of the industry’s performance.” Etienne Paresys, Head of Research, Preqin
