LBO funds struggle to stand out

A favourable exit environment has tightened the spread of returns among the best and worst performing LBO funds, according to eFront's Returns, risks and liquidity of LBO Funds in Q4 2017.

Leveraged buyout fund performance has become “homogenous” as benign market conditions limit managers’ ability to stand out from their peers, according to research from risk management software firm eFront.

The company found that the spread of total-value-to-paid-in multiples between the top and bottom 5 percent of funds was unchanged from Q3 at 1.314x last quarter. The spread has settled close to the all-time low of 1.276x recorded in Q2 2017.

“In the current benign environment, the performance of fund managers tends to be more homogeneous,” the firm said in its report Returns, risks and liquidity of LBO Funds in Q4 2017. “This is related to the challenging environment to create outperformance for top quartile managers, and the support provided by a favourable environment for exits for all the fund managers including the less performing ones.”