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Distressed Private Equity Performance by Vintage Year

by Hayley Wong

  • 24 Dec 2010
  • PE

Preqin’s database has performance data for 191 distressed private equity vehicles. Distressed private equity funds are made up of distressed debt, turnaround and special situations funds. Since the financial crisis distressed private equity funds has become a popular investment strategy with fund managers who are taking advantage of the crisis to potentially make profitable investments. Examining distressed private equity with vintages 2000-2007, the median IRRs for distressed private equity are in the range 7-15%, with vintage 2002 returning a median IRR of nearly 30%.

Most bottom quartile IRR boundaries for distressed private equity funds of vintages 2000-2007 are in the black, with only the bottom quartile IRR boundary for vintage 2007 funds producing a negative return (-0.2%). The majority of top quartile IRR boundaries are in the range 15-20%, and most of bottom quartile fund returns are in the region of 8-12%. The most noticeable top quartile performance is for vintage 2002 distressed private equity funds, which require an IRR of more than 50% to be considered top quartile.

Looking at more recent vintages such as 2006 and 2007, distressed private equity funds have performed well compared to other private equity fund types, with median IRRs higher than mezzanine and buyout funds of the same vintages. Vintage 2007 distressed private equity funds have a median IRR of more than 6%, compared with vintage 2007 mezzanine funds, which have a median IRR of 3%, and buyout funds of all sizes of the same vintage produced IRRs in the range -2.1 to +4.2%.

More information on private equity performance can be found on Preqin's Performance Analyst.

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