PE recovery rate at all time high

Fintech firm CEPRES reports the recovery rate for private equity transactions recording losses is at a record high level.

The recovery rate for private equity transactions continue to maintain record levels of around 80 percent in 2014, according to results released by financial technology firm CEPRES. The firm said that 2015 was too early to comment on, due to lag in outcomes, according to a statement.

The recovery rate measures how much money was recovered in a buyout transaction by the GP when an investment made a loss. In 2006 and 2007 the rates of recovery were 48 and 49 percent respectively, which meant they were losing half their money. 

“Many people think these days that the private market is going back to 2005, but now fund managers are more disciplined about the deals they're managing and are able to recover most of their money, and we can see it from the recovery rates,” a CEPRES spokesperson said.

After taking a dip in 2006, following the recession, the percentage of recovery has risen in recent years to 80 percent in 2014, up from 60 percent in 2010. In 2000, the recovery rate for private equity was 31 percent. 

“By maintaining discipline and negotiating stronger covenants, GPs show they learned the lessons from the credit crisis,” said Daniel Schmidt, chief executive officer of CEPRES. “Further good news is that default rates are largely flat since 2010 and don't indicate any increased market stress, thus our outlook for private markets remains positive despite pricing and leverage pressures.” 

The results are from the new loss and recovery benchmarking in PE.Analyzer, an online software-as-a-service platform for private equity investors. The analysis is based on investments in 34,743 portfolio companies across 2,235 private equity funds and $1.5 trillion of capital. 

The platform benchmarks private equity deals, portfolio companies and funds, and includes IRR, multiple defaulting benchmarking, variations for different regions, sectors and strategies (buyout, growth, venture, private debt and infrastructure). The platform delivers analysis of private markets and tracks records to the desk of LPs and GPs, allowing them to interact on the platform for mutual benefit and privately, according to the statement. 

CEPRES is a Munich, Germany-based financial technology company, founded in 2001. The company also provides PreFore, a forecasting and risk system that delivers portfolio analysis methodologies to private investors and CepreX, a system that offers real asset-based indices.