More US performance data but more upbeat too

Analysis by Cambridge Associates on US private equity and VC performance reaffirms the long-term nature of investment plus mild up tick in last quarter.

Consulting and advisory firm Cambridge Associates has released new performance data for US buyout and VC fund performance that confirms the slump in returns but also suggests that returns are now increasing – but slowly and from a very small base.

For 2001, the firm reported that private equity fund net pooled returns fell 11.4 per cent, while venture capital fund net pooled returns fell 38.9 per cent. As a comparison, the S&P 500 fell 11.9 per cent whilst the Nasdaq composite fell 21.1 per cent for the same period.


Cambridges’ analysis reveals a less than impressive average return performance for private equity whilst average venture fund returns look far stronger. The inference most will gather from the private equity average is that different funds have delivered widely diverging returns.  Over the past three years the firm reports that private equity and venture capital funds delivered returns of 3.8 per cent and 87.5 per cent respectively. For five years these figures grew to 9.5 per cent for buyout and 54.4 per cent for VC and if a 10 year base is taken then private equity is said to have delivered a 14.3 per cent return versus 34.2 per cent for VC.


Suggesting that there is now albeit small amounts of light at the end of the tunnel, the firm also reported that for the quarter ended 31 December 2001, private equity funds almost broke even, returning –0.1 per cent, a marked improvement on the previous quarter’s –8.1 per cent return. Venture capital funds did better too, returning –6.2 per cent in the quarter as opposed to –17.4 per cent in the preceding quarter.


Cambridge advised that these results were based on returns data they have compiled that is exclusive of management fees, expenses and carried interest performance fees. The funds covered represent approximately 80 per cent of capital raised by VC firms since 1981 and approximately 70 per cent of capital raised by buyout, subordinated debt and other private equity funds since 1986