Private Equity Horizon IRR (as of 31-March-2009)

by Etienne Paresys

  • 09 Oct 2009
  • PE

All private equity strategies posted negative one-year returns for the period ending March 31, 2009. With a horizon IRR of -40.5%, private equity real estate is still the worst performing private equity strategy, suffering the most from the aftershock of the sub-prime crash and the credit squeeze. Buyout funds were the second-worst performers, with a horizon IRR of -33.8% during the period. Other strategies have suffered less, with fund of funds at around -20% and venture capital at -17.1%. Mezzanine, the only strategy that posted positive one-year returns in Q4 2009, is now also in the red, at -2.0%.

Mid- and long-term horizon IRRs are all in positive territory, with the exception of three-year real estate returns to March 09, with an IRR of -4.0%. With 6.0% net returns over a three-year period, mid-term overall private equity returns have certainly been affected by the current crisis, but long-term performance remains very strong, at 20.6% over five years.

Short-term private equity returns are still showing negative trends. The latest quarter has seen a further 4% reduction in NAV compared with the previous quarter. However, the change was nowhere near as severe as the change in the previous quarter, possibly suggesting that the industry’s poor short-term performance is starting to bottom out and that the worst seems to be over. Q1 2009 was also a low point for listed stocks, and we would expect private equity to now begin to mirror the recovery that we have seen in the public markets, and that NAVs will see positive movement over the next quarter.

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

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