Mega buyout fund performance

by Bronwyn Williams

  • 04 Feb 2011
  • PE

Mega buyout funds come to prominence within the private equity industry during the financial boom, and have come to represent a significant proportion of the industry’s total capital. Due to their use of leverage, mega buyout funds suffered the biggest fall in performance of all the buyout fund size groups.

Preqin’s Performance Analyst database holds performance data on 1,253 buyout funds. The median IRRs for vintages in the years leading up to 2005 are in the black for all buyout fund size groups (mega, large, mid-market and small), lying in the region of 8.7-34.1%. Vintage 2001 buyout funds have generated median returns above 20% for all size groups. More recent vintages have lower returns; for example, the median IRRs for all buyout funds size groups of vintage 2006 funds are in the red, while vintage 2007 median IRRs for each size group range from -1.3% to 4.2%. Despite median IRRs in the red, vintage 2006 buyout funds have improved their performance since this time last year. Last year, the four size groups for this vintage had median IRRs in the ranging from -20% to 0%, but now all the size groups are generating median IRRs of -5.9% and above. Funds of more recent vintages are still in the early stages of their investment cycles and therefore still have time to improve their returns.

More details on private equity performance can be found on Preqin’s Performance Analyst.

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