Investors are faced with many choices when considering private equity investments, such as the type of fund strategy and the main geographical focus of a fund. Commitments to different types of vehicles will help diversify their portfolio and reduce the overall level of risk. This blog compares the horizon IRR return data of private equity funds which have a main investment focus in Europe, North America and Asia over a one-, three- and five- year period.
Preqin’s Performance Analyst uses cash flow data for over 2,400 private equity funds to calculate horizon IRRs over defined periods, such as one-year, three- year and five-year periods. Examining the one-year horizon IRR returns over the three quarters from Q3 2012 to Q1 2013, Europe-focused funds yield higher returns over one-year to September 2012 and to December 2012 compared to North America-focused funds, producing horizon returns of 15.1% and 14.2% respectively, while over the two periods, North America-focused funds produce horizon returns in the region of 13.0%. Looking at the one-year horizon returns to March 2013, funds with a main investment strategy in North America produce returns of 12.7% and Europe-focused funds post a return of 9.2%. Comparing these two regional returns with Asia-focused funds, Asian private equity funds display lower horizon returns but show increases in returns over the three quarters. For the one-year period to September 2012 the horizon return is 5.0% and for the one-year to March 2013 the return is 6.5%.
Analysing the horizon returns to March 2013, the three-year horizon returns are the highest returns yielded by all three regional funds. Private equity vehicles with a main investment focus in Europe produce three-year returns of 15.6%, North America-focused have returns of 14.4% while Asia-focused funds post returns of 8.6%. Contrastingly, the five-year horizon returns to March 2013 are the lowest returns for all three regions; North America- and Europe-focused funds post five-year returns in the region of 5.0% and higher, and Asia-focused funds report a return of 3.9%.