PEI 300 generates better IRR than last year

Analysis by tech company Bison shows this year’s returns are rising.

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This year’s PEI 300 firms are better performers than last year’s ranking, according to data provided by private equity technology group Bison.

The top 300 private equity firms by amount of capital raised in the past five years generated, on average, a net internal rate of return since inception of 13.72 percent. This is up from last year’s PEI 300, which generated 12.9 percent. The top 300 firms from 2016 had a 13.3 percent return.

The performance of PEI 300 firms is also getting closer to that of PEI 10 firms, which generated 13.61 percent, showing that being a top fundraiser doesn’t automatically translate into better returns.

However, PEI 50 firms remain the top performers of the group, returning 14.91 percent, 80 basis points higher than returns from last year’s PEI 50.

While absolute returns are on the rise, the extra return investors receive from firms in the ranking over public markets, as shown by Bison’s PME Alpha, is going down.

The top 50 firms generated 8 percent over public markets, compared with 9.6 percent last year, but still above the 6.8 percent achieved in 2016. PEI 300 firms overperformed the public markets by 6.63 percent, which is down from 7.8 percent in last year’s ranking.