Growth Funds – Median Net IRRs and Quartile Boundaries

by Gary Broughton

  • 27 Apr 2012
  • PE

Growth funds are a relatively new strategy where fund managers look to take minority stakes in growing companies and are particularly prominent in Asia. Growth funds tend to make investments in companies that are more mature than those seen in later-stage venture deals, but they are not as established as to attract leveraged buyouts. Preqin currently holds performance data for 156 growth vehicles. 

An examination of the median IRR together with the top and bottom quartile boundaries for growth funds of vintage year 2005 to 2008 gives an insight into the performance of funds adopting this relatively new strategy. The median returns range from 23.9% for vintage 2005 funds to 7.0% for funds with vintage year 2008. Top quartile vintage 2005 funds are currently achieving returns greater than 41.8% whereas for subsequent vintage years, the top quartile boundary ranges from 14.4% to 18.5%. The bottom quartile boundary is positive for all vintage years from 2005 to 2007, falling into the red for vintage 2008 funds. However, these funds are still early in their fund lives and performance could improve as fund managers add value to their investments.

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