Cambridge: PE returns positive for fifth straight quarter

Cambridge’s private equity index shows that the asset class distributed more than $13bn in Q2, the largest quarterly distribution since 2007.

Private equity returned 1.6 percent in the second quarter, down from 4.4 percent in Q1 but enough to mark the fifth straight quarter of positive returns for the asset class, according to Cambridge Associates.

Private equity outperformed the public market indices in Q2, as the Dow Jones Industrial Average and NASDAQ Composite index fell 9.4 percent and 12 percent, respectively. The private equity index also returned 5.8 percent for the first two quarters of 2010, while the Dow Jones Industrial Average and NASDAQ Composite indices lost 5 percent and 7 percent, respectively, over the same period.

Distributions in Q2 also exceeded those from Q1. Private equity fund managers returned more than $13.1 billion to limited partners in the second quarter, a 43% increase from the first quarter and the largest quarterly distribution total since 2007.

Seven of the eight “key sectors” for private equity – those representing at least 5 percent of the value of the index – saw positive returns in Q2, with software leading the group at 5.6 percent and energy representing the only negative return at -.6 percent.

“It was encouraging to see such a meaningful increase in private equity fund distributions along with the breadth of positive returns among the key sectors in our PE benchmark index,” Andrea Auerbach, managing director at Cambridge, said in a statement. “There has also been an increase in the volume of capital calls, reflecting the market's continued return to a more transactional state, further buoyed by the increased availability of leverage.”

Managers in the US private equity index called just over $19 billion from limited partners in the second quarter, representing a 71% increase in contributions from last quarter.

The second quarter also marked the fifth straight quarter of positive venture capital returns, which earned .4 percent in Q2 and .7 percent in Q1.

Cambridge’s private equity index includes 847 funds. The benchmark is capital-weighted so funds representing large amounts of the index’s value are mostly responsible for its performance.