US private equity turns positive

US private equity performance in the short term posted strong gains, while 10-year venture capital returns dipped into negative figures, according to Thomson Reuters quarterly data.

US private equity turned significantly positive for the 12-month period ending 31 March 2010, posting returns of 21.9 percent, versus -24.4 percent for the same 12-month period in 2009, according to Thomson Reuters’ US Private Equity Performance Index (PEPI).

One-year returns for venture capital funds registered a seven percentage point increase from last quarter, reaching 11.5 percent. Buyout fund returns over the past year increased even more versus the previous quarter, increasing 9.1 percentage points to 19.4 percent.

Overall, venture capital and buyout fund returns continued to outperform the US public markets across most investment periods through 31 March.

Reuters’ US Private Equity Performance Index is based on the latest quarterly statistics from its Equity Performance Database and includes 2,044 US venture capital and private equity partnerships with a capitalisation of $982.6 billion. 

Other studies have shown private equity returns gaining ground this year. The State Street Private Equity Index – which measures performance of nearly 2,000 private equity funds around the world –  posted a 2.22 percent positive return in the first quarter of 2010.  The figure represents a drop of 372 basis points from the fourth quarter of 2009, but an increase of 868 basis points compared to the returns recorded in the first quarter of 2009.

The average rate of return on private equity funds worldwide suffered as a result of poor European-based fund performance, which posted a loss of 1.9 percent for the first quarter of 2010. Funds outside of Europe and the US had average IRRs of 4 percent for the quarter. US-based funds additionally contributed to the positive average, posting a mean return of 3.08 percent.