What Mark-to-Market? PE Firms Keep Portfolio Valuations Steady
Dear reader: I plead appalling naiveté when it comes to mark-to-market accounting. You see, I had assumed that FAS 157 would result in private equity firms using public market comps when valuing their portfolio companies. As such, my theory was that the S&P 500 losing more than 11% of its value in Q1 would be coupled by double-digit declines among typical PE portfolios. When that same index rebounded in Q2 by more than 15%, we’d see some corresponding leap in PE portfolios. Not a perfect mirror, of course, but at least something reflective. Silly me. New data from Cogent Partners shows that the median buyout fund write-down was -2.1% in Q1 2009, while the median VC fund write-down was -2.8 percent. In fact, only 15% of all funds examined by Cogent reported a percentage decline greater than that of the S&P 500.
