All Private Equity Cash Flow Analysis

by Bronwyn Williams

  • 26 Feb 2010
  • PE

Using cash flow data for private equity funds, which Preqin holds on more than 1,700 private equity partnerships, to generate the net cash flow of a typical private equity fund illustrates the life cycle of a private equity fund.  The following analysis includes funds with vintages between 1978 and 2008 and is based on a typical investor commitment of $10 million to a private equity vehicle. The data is annualized to create the effect of a typical private equity fund.

Analysing the net cash flow of a typical private equity fund shows that in the first four years of a fund’s life the majority of capital is drawn down. Investors will find themselves in the worst position in the fourth year, when the most amount of capital has been called up by the fund managers, but investors have not yet received significant amounts of distributed capital back from the GP. As the fund moves into the latter stages of its life, it breaks even in its 8th year and by the eleventh year has returned $4 million in profit to the investor.

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