Buyout funds accounted for almost two-fifths (38%) of the private equity industry’s assets under management as of September 2013, and notably, represent the same percentage for dry powder and residual value also.
In the year to September 2013, buyout funds’ net asset values (NAV) increased by 12.6% on average, equivalent to a weighted figure of +14.8%, and thus indicating that larger funds performed slightly better on average than their smaller counterparts. In fact, mega buyout funds significantly outperformed large, mid and small buyout funds in the year to September 2013, in terms of change in NAV. Mega buyout funds witnessed a 17.3% increase, followed by large (+11.7%), mid (+11.7%) and small (+10.0%). Mega buyout funds also saw a greater change than the other three fund sizes in the year to December, March and June 2013.
Preqin’s Performance Analyst online service shows that of all geographies, the average change in NAV in the year to September 2013 was greatest in US-focused funds (+13.8%). Mega buyout funds focused on the US saw an increase in NAV of 20.7%, compared with a 12.3% increase for Europe-focused mega buyout vehicles. Of buyout funds predominantly targeting European investment opportunities, mid buyout funds saw the greatest increase, of 14.7%, closely followed by large (+12.8%), mega (+12.3%) and small (+10%). Buyout funds with a focus outside Europe and US saw far smaller changes, large 9.3%, mid -4.1% and small -0.6%, representing a 2.7% increase for funds focused outside Europe and US overall.
Looking at the horizon returns of buyout funds, over the ten year horizon to June 2013, buyout funds outperform venture capital (+4.5%), fund of funds (+8.2%), mezzanine (+12.2%) and distressed private equity (+25%). Over the one- and five-years to June 2013, buyout funds were outperformed only by distressed private equity, but again are the greatest IRR over the three year horizon.
The PrEQIn Index (rebased to 100 as of Q4 2000) also shows a positive outlook for buyout funds with the index having risen in every quarter since Q2 2011, and exceeded only by real estate (until Q3 2009) and distressed private equity (to date) since the index’s inception. The buyout index has also outperformed the S&P 500 index since 2000. Specifically in 2013, the buyout index stands at 330.4, compared to 127.4 for the S&P 500 index, and it is notable that both points are maximum levels the respective indices have reached.