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One-, Three- and Ten-Year Horizon IRRs by Private Equity Fund Type - November 2013

by Emma Underwood

  • 01 Nov 2013
  • PE

Horizon IRRs provide a snapshot of the private equity industry over a set period of time, and Preqin generates these over one-, three-, five-, and ten-year intervals. This measure provides an insight in to the trends in performance across fund types and the regions in which they invest. Here, we explore the performance of the main private equity fund types across the one-, three- and ten-year periods to 31 March 2013.

Horizon IRRs are calculated using the fund’s net asset value as a negative outflow at the beginning of the period, any cash paid or received during the period, and the fund’s residual value as a positive inflow at the end of the period. Preqin calculates horizon IRRs using cash flow data for over 2,000 private equity funds.

The horizon returns for the main private equity strategies are all positive over the one-year timeframe to 31 March 2013, with the returns ranging between 5.9% and 13.4%. Buyout funds report the highest returns of 13.4% over the period, followed by mezzanine (12.3%), private equity funds of funds (7.3%) and venture capital (5.9%).

In comparison, the horizon returns over the three-year period to 31 March 2013 are more closely aligned across the various fund types, ranging between 10.2% and 16%. Buyout funds report returns of 16%, private equity funds of funds 10.9%, mezzanine 10.3% and venture 10.2%.

Over the long-term horizon of ten years to 31 March 2013, which follows the private equity fund model most closely, buyout funds generated a return of 24.7%, mezzanine 13.8%, private equity funds of funds 7.7% and venture 5.9%.

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