The financial crisis, coupled with the obligatory fair value methodology being applied to portfolio companies, has seen the value of private equity funds fall, most notably since the third quarter of 2008, when Lehman Brothers collapsed. Looking at the weighted change, which takes into account fund size and demonstrates the role larger funds have in the industry, fund valuations increased between Q3 and Q4 2007 by 2% and saw almost no change in value in Q1 and Q2 2008.
It is not until Q3 2008, the quarter in which Lehman Brothers filed for bankruptcy, that NAV starts to decline significantly quarter on quarter. The biggest quarter-on-quarter decline in average NAV came in Q4 2008, when it decreased by an average of 14%. In Q1 2009 the decrease in fund valuations continued, but at a much slower rate, with a 4% decrease measured between the last quarter in 2008 and the first quarter in 2009. Although results from March 2009 show valuations are still falling, the decline is not as severe as either the third or fourth quarters of 2008.
For full analysis see our recent press release, or for more information on performance across the private equity industry, please see how our Performance Analyst service can assist you.