Performance of Mezzanine Funds

by Etienne Paresys

  • 25 Sep 2009
  • PE

Preqin holds performance data for 151 mezzanine funds, allowing us to create complete performance benchmarks for this investment class. Returns for mezzanine funds are generally robust, with the median IRRs always lying within the 10-20% range over the years. With a median IRR of 19.8%, mezzanine funds of 2001 vintage are particularly strong performers. 1999 produced some of the lowest returns for mezzanine funds, with bottom quartile funds yielding an IRR of less than 1%. Returns for 2005 and 2006 vintage funds are down, with little spread between the top quartile, median and bottom quartile IRRs.

Mezzanine is a relatively low-risk strategy, as  most funds are posting IRRs fairly close to their median benchmarks. Most net IRRs are to be found within +/-5% of the median benchmark, with 71% of mezzanine funds in this range. There are also very few funds generating extremely low or surprisingly high IRRs. Only 3% of mezzanine funds outperform the median fund by more than 45%, while just 4% have IRRs underperforming the benchmark by more than 20%.

The high concentration of net IRRs and good average returns confirms that mezzanine is an investment of choice within the private equity industry.

For more information on performance across the private equity industry, please see how our Performance Analyst service can assist you.

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