Using cash flow data for 1,818 private equity funds with vintages of 1979-2009, Preqin analyzed the rate at which fund managers typically draw down from, and distribute capital back to, their investors. The model uses the typical annual contributions and distributions made and received by an investor with a $10 million commitment. It shows that by the end of year three, more than half of the LP’s commitment has been invested. LPs are at their lowest net cash flow position during year four of the investment life, at -$5 million. Annual distributions exceed $1.5 million for the following five years. LPs break even after year eight, and by year 12 the net cash flow to the investor equals $4.5 million.
More details on private equity performance can be found on Preqin’s Performance Analyst.