Distributions surge in first quarter

Average private equity fund valuations at the end of the first quarter were down slightly compared to Q4 2010, but distributions in relation to drawn down capital shot up to levels not seen since 2008.

The first quarter of 2011 saw more distributions across all three major private equity strategies – buyout funds, venture capital and distressed debt and mezzanine –  than has been recorded since the financial crisis, according to statistics from the State Street Private Equity Index.

Distributions in relation to the cumulative amount of drawn down capital, referred to as DPI, came out to 1.68 in Q1 2011, the highest number recorded since 2008. Average private equity fund valuations were written up by 5.58 percent in Q1 2011, a 2.07 percentage point decline compared to fourth quarter of 2010, but a 3.35 percent point increase compared to the same period a year ago. The first quarter of 2011 marks the eighth consecutive quarter of positive returns, prior to which the asset class saw five straight quarters of valuation drops.

In the US, the quarterly return for the index was 6.11 percent, marking a slight decline from the 7.41 percent return recorded the previous quarter.

For the 12-month period ending 31 March 2011, buyout funds were the best performers, generating a 23.9 percent return, compared to venture capital and distressed debt and mezzanine, which recorded returns of 18.7 percent and 13.9 percent, respectively.

All private equity recorded a 22.6 percent return during the same time period, while the “since inception” IRR as of 31 March was 12.74 percent, a slight increase from 12.33 percent in Q4 2010.

The State Street Private Equity Index tracks more than 1,800 private equity funds, largely from the 1990 vintage until the present, on a dollar-weighted basis, meaning that larger funds with a disproportionate amount of investor capital under management represent an equally disproportionate share of the performance in the index.