PERFORMANCE Short-term drag

The head of a major US pension's private equity programme, expressing his frustrations recently to PEI, said that his GPs don't seem to understand the consequences of his long term IRR being cut nearly in half. What are they going to do, he asked, to make the private equity asset class look more attractive?

According to recent performance figures from State Street Private Equity Index, the average long-term performance of private equity funds is 9.08 percent. This is down dramatically from the third quarter of 2007, when long-term performance weighed in at a more appealing 15.03 percent.

As the graph (right) shows, the short-term performance of private equity is dragging down an otherwise attractive long-term track record. The rather better news is that State Street said valuations may have hit rock bottom in the second quarter of this year.