Private Equity Cash-Flow

by Bronwyn Williams

  • 30 Apr 2010
  • PE

The following analysis is carried out using Preqin’s cash-flow data for private equity funds and includes data from 1,658 private equity funds with vintages ranging from 1979 to 2008. The model seeks to illustrate how much capital is called and distributed annually to the investor and demonstrates the resulting net cash-flow of a typical private equity fund. The cash-flow data is based on a typical investor commitment of $10 million to a private equity vehicle, with the data annualized to create the effect of a typical private equity fund’s lifespan. The data shows that the majority of commitments are drawn down in the first four years of a fund’s life. In the fourth year, the cash-flow of the investor is at its worst net position, with a large proportion of capital drawn down and a relatively small amount distributed back. The fund breaks even in its eighth year and by the eleventh year has returned $4 million in pure profit to the investor.

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