Performance of Mega, Large, Mid and Small Buyouts

by Etienne Paresys

  • 11 Jun 2010
  • PE

Preqin is pleased to announce the introduction of a new performance benchmark for buyout by fund sizes, aiming to measure and compare returns generated by mega, large, mid and small buyout funds. These benchmarks are calculated using data from the Performance Analyst database, which contains net returns to LPs for 1,212 buyout partnerships. In terms of aggregate value, this represents around 80% of all capital ever raised by buyout firms.

The return multiples of buyout funds generally lay between 1.50x and 2.00x for vintages 1997 to 2002, with some exceptions. Mega and small buyouts funds of vintage 2001 have produced the highest returns, with multiples in the region of 2.20x. Multiples have generally decreased for each vintage year from 2003 to 2005, dropping from 1.50x to around 1.00x. All median multiples are below 1.00x from vintage 2006 onwards.

Returns for mega buyout funds with vintages 2000 to 2003 are between 20% and 35%. Mega buyout funds of vintages 2004 and 2005 have significantly lower returns, with median returns of 6.9% and 8.5% respectively. Net IRRs of mega funds of vintages 2006 and 2007 are currently in the red and below those of other fund sizes. Large, mid, and small buyout funds are all posting slightly lower returns than mega buyouts for the vintages 2000 to 2003. Small buyout funds of vintages 2005 and onwards are performing better than larger funds. As they do not normally use a large amount of leverage, smaller funds seem to have been less affected by the financial crisis.

It must be emphasized that the performance for recent vintages is not yet fully meaningful as these funds are relatively immature and their performance is likely to improve over time. The information here shows that fund sizes have had an effect on the returns generated by buyout funds. Each size range has its own advantage and investors should consider investing across all sizes in order to diversify their portfolios.

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