Rolling One-Year Horizon IRRs

by Etienne Paresys

  • 11 Dec 2009
  • PE

Private equity returns have changed significantly over the last couple of years. The one-year horizon IRR for all private equity, which stood at 26% in December 2007, rapidly decreased during the following quarters, becoming negative at -11% in September 2008, and reaching its lowest point, at -30%, in March 2009. The one-year rolling IRR continued to decrease steeply until December 2008, but this decline decelerated notably between Q4 2008 and Q1 2009. The one-year return still remained negative as of June 2009, but had improved quite significantly from that of the previous quarter, moving from -30% in March 2009 to -24% in June 2009.

Rolling one-year horizon IRRs for buyout funds are very similar to those of all private equity because a large proportion of the industry’s capital is committed to buyout funds. However, venture capital funds that were posting lower returns than buyouts as of December 2007, are now outperforming the buyout sector. They have also been strongly affected by the financial crisis, but as of June 2009, their one-year IRR, at -16%, is in not as bad a position as that of the buyout industry.

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