Recently, private equity funds have experienced a particularly volatile period, with the onset of the credit crunch, the introduction of mark to market portfolio valuations which came into force in 31 December 2008 and the continuation of market instability. The release of June 2009 data shows that the private equity industry is beginning to recover and that fund valuations are showing early signs of improvement.
The weighted quarterly change, which takes into account fund size, shows a healthy increase of 5.0% between Q1 2009 and Q2 2009. By comparison, the non-weighted change shows an increase of 2.7% for the same quarter and the discrepancy between these figures demonstrates that the larger funds are posting better valuations than the smaller funds.
This is good news for the private equity industry, as overall performance had been continuously decreasing each quarter since Q1 2008. Conditions in the public markets were favourable in Q3 2009, so we can assume it is likely, with mark to market valuations, that Q3 2009 private equity valuations will show continued improvement from the Q1 2009 low point.
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