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Performance of Growth Funds – An Examination of the Quartile Multiple Boundaries by Vintage Year

by Gary Broughton

  • 18 Nov 2011
  • PE

A growth fund is a vehicle which takes minority buyout positions within investee companies and generally does not use leverage to complete deals. As such, these funds tend to make investments in companies that are not profitable enough for leveraged buyouts, but are typically more profitable than seen in typical late-stage venture deals.

Preqin currently holds fund level net-to-LP performance data for 87 growth funds with vintage years between 2005 and 2009. Using Preqin’s new growth benchmarks we can gain insight into the performance of this fund type by examining the quartile multiple boundaries.

Vintage 2005 funds are currently showing the highest median multiple within the sample of 1.45x called-up capital, with even the bottom quartile boundary currently in the black - showing 1.06x contributed capital. For more recent vintage years, the quartile boundaries are closer together; however the median multiple figure is greater than 1.00x across each vintage year within the sample and top quartile boundaries are consistently greater than 1.20x called-up capital. It is important to note that funds of more recent vintage years are still early in their fund lives, and consequently performance could improve as fund managers add value to their investments.

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