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Performance Analysis of Distressed Private Equity Funds

by Hayley Wong

  • 07 Sep 2012
  • PE

Preqin’s Performance Analyst currently holds performance data for over 240 distressed private equity funds, a category that includes distressed debt, special situations, and turnaround strategies. Using the Custom Benchmarks module of Performance Analyst, we can benchmark the performance data of these funds by vintage year.

Distressed private equity funds of more recent vintages have been putting capital to work quicker than buyout funds, with the median called-up to committed capital ratio for vintage 2008 distressed funds standing at 87.8%, compared to a figure of 63.5% for buyout funds.

The median distributions to paid-in capital (DPI) ratio for distressed private equity funds is above 100% for all vintages from 1996 to 2004, with the median vintage 2001 fund having returned 175.2% of paid-in capital back to investors so far, making 2001 the best performing vintage by this measure. Funds of vintage 2005 and onwards generally still have the majority of their total worth tied up as unrealized value.

Looking at the median net IRRs of the funds contained within this customized benchmark, vintage 2001 once again is the best performing, with a median net IRR of 24.7%. Vintage 2002 and 2003 funds also have a median net IRR in excess of 20%.

The most recent two vintages for which meaningful IRR figures are available – 2008 and 2009 – demonstrate promising early performance, with the median net IRRs standing at 14.1% and 16.3% respectively. However, it is important to remember that funds of more recent vintages still have most of their total worth in unrealized value, so their performance is likely to change over time.

Interestingly, data from the PrEQIn Index, the first ever index covering the entire private equity industry, shows that distressed private equity has been the best performing private equity strategy over the last decade.

 

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