Looking at some private equity benchmark views

May 10, 2021

It always pays dividends to peek at updated data out of private equity data provider Pitchbook. This month’s benchmark views are no different. Here are some interesting views on private equity benchmarks according to Pitchbook’s May 6th, 2021 release.

Internal Rate of Returns by Vintage

The first view is of internal rate of returns (IRRs) by vintage year of the fund. Before looking, which year would you guess comes out on top?

Interestingly, although not surprising, the 2002 vintage year continues to exhibit the strongest IRR. Pitchbook’s most recent estimate put the 2002 median IRR value at around 16%, slightly above the 2001 value. Not far behind the 2001/2002 recession-induced investing are 2003 and 2000, with both slightly below 14%. The most recent year available – 2015 (remember, this is vintage statistics, so it makes no sense to report on years such as 2019, 2020, or 2021) – has an IRR of around 13%. Not too bad by most measures.

On the other end of the spectrum, the weak IRR years are the years in which the global economy was booming. These years include 2004 through 2010.

Source: Pitchbook

Multiples by Vintage

The next view is multiples by vintage year. Before looking, for the years from pre-1996 through 2015, which year would you guess has had the strongest multiple?

As with the prior graphic, interestingly, although not surprisingly, the year with the strongest multiple using both the pooled multiples method and the equal-weighted pooled multiples is 2001. The 2001 TVPI is 2.16x for pooled multiples and 1.99x for equally weighted pooled multiples. The 2001 results are well ahead of second place, 2002, which has exhibited multiples of 1.99x/1.83x (pooled multiples/equally weighted multiples).

What about the weakest year? So far, 2018 has the weakest measure, with its pooled multiple at 1.14x and its equally weighted multiple at 1.12x. Guess it pays to have a longer period to achieve material investing success.

Source: Pitchbook

One-Year Horizon IRRs by Selected Strategies

A third interesting view offered by Pitchbook was the one-year horizon IRRs by select strategies. Interestingly, the strongest strategy for 2020 was PE growth, with an IRR of 24.5%. Following PE growth’s lead in 2020 was venture capital at 21.3%, buyout at 17.2%, infrastructure at 5.5%, and private debt at 1.9%.

On the bottom end of the IRR spectrum for 2020 is oil & gas at -25.6%. Also in the doldrums in 2020 were secondaries at -2.4%, other PE at 1.4%, and real estate at 1.6%.

Source: Pitchbook

Summing up

Overall, the private equity industry continues to provide healthy measures of success. The future generally looks bright for professionals with a knack for private equity investing.

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