Distressed private equity includes distressed debt, turnaround and special situations funds. Although this is still a niche sector, making it difficult to produce meaningful benchmarks, we have collected data for 168 funds, a large enough sample to analyse the performance data. Overall, the median IRR for each vintage year is healthy, generally in the 10-15% range, with the median vintage 2002 fund producing excellent returns of around 30%. The median IRR for 1998 vintage funds marks a low point for the sector, at 6%. Such low median performance has not been repeated in later vintages, save for the more recent vintages of 2005 and 2006. While the economic downturn has affected these vintages, it should be noted that the relative immaturity of these funds should also be considered.
An examination of top-quartile funds reveals that some vintages have produced excellent returns, most noticeably vintage 2002, where top quartile funds have generated IRRs of more than 47% and bottom quartile funds have also performed well, with the 25th percentile boundary standing at an IRR of 17%. For the majority of vintage years, the 75th percentile boundary, which marks the beginning of the top-quartile, stands at between 15% and 25%. The bottom quartile boundary shows steady returns for the industry, with returns in the region of 5-8%, except for vintages 1998 and 2003 (-1% and 2% respectively), and more recent, immature vintages.
For more information on the performance of distressed private equity funds and all other types of private equity fund, please click here.