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2014 Preqin Private Equity Performance Monitor Sample Pages.Indd Executive Summary - Sample Pages The 2014 Preqin Private Equity Performance Monitor Fig. 1.1: All Private Equity - Assets Under Management, 2000 - 2013 4,000 1. Executive Summary 3,500 1,174 3,000 941 Dry Powder 2,500 1,007 ($bn) Record Highs Furthermore, and perhaps most notably 993 for investors, performance data shows that 2,000 1,067 1,011 In last year’s Preqin Private Equity distributions have increased considerably Unrealized 1,500 1,075 Performance Monitor, we acknowledged over the past year, from $381bn in 2012 to 2,546 Portfolio Value 806 2,332 the economic turmoil that was endured by $568bn in 2013, making it the highest level ($bn) 1,000 563 2,029 the industry following the crash of 2008, of capital LPs have ever received back from 1,783 402 409 298 377 407 1,265 1,413 the onset of the European sovereign debt their private equity investments in a year. 500 898 1,204 Assets under Management ($bn) 675 crisis, and the fl uctuations around these Fig. 1.2 displays the new peak, and more 418 374 360 465 554 events. All-in-all, the progress of the private trends in private equity dry powder and 0 equity market since the downturn six years AUM are discussed in Chapter 11. ago has been encouraging, refl ected in the ever increasing amounts of capital investors Risk and Return Dec-00 Dec-01 Dec-02 Dec-03 Dec-04 Dec-05 Dec-06 Dec-07 Dec-08 Dec-09 Dec-10 Dec-11 Dec-12 Dec-13 around the world commit to the asset class. Also revealed in the 2014 Private Equity Fig. 1.2: All Private Equity - Annual Amount Called-Up, Distributed and Unrealized As confi rmed in Preqin’s latest Investor Performance Monitor is Preqin’s latest Value Outlook survey, LPs are still looking analysis of risk-return trade-offs, broken 600 3,000 to increase their allocations to private out by geographic focus, fund strategy and equity, and as upticks are seen in annual vintage year. By plotting the median against 500 2,500 fundraising fi gures, the industry’s assets the standard deviation of net IRRs, we are Capital under management (AUM) have continued able to examine which fund types have ($bn) Unrealized Value Called to climb ever higher. In fact, since the turn of the most attractive risk-return profi le. As 400 2,000 ($bn) the millennium, the private equity industry’s explained in Chapter 12, and seen in Fig. AUM have risen year on year, and have 1.3, a signifi cant range is displayed across Capital 300 1,500 Distributed attained the highest fi gure to date of $3.7tn both axes for the different private equity ($bn) as of 31 December 2013. Preqin calculates investment strategies. Though there are AUM by adding the uncalled capital risks inherent in any illiquid market such as 200 1,000 Unrealized commitments (dry powder) to the unrealized private equity, the level of risk between the Value value of portfolio assets, as displayed in Fig. different fund types varies by some margin. ($bn) 100 500 1.1, which illustrates the steady incremental increases in unrealized portfolio value each Secondaries funds emerge as the best year, and the record amount of private performing fund type, with the highest Annual Amount Called/Distributed ($bn) 0 0 equity dry powder available as of December median net IRR and a relatively low risk 2013. measure. The private equity secondary 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 1 © 2014 Preqin Ltd Executive Summary - Sample Pages market has gone from strength to strength, The increase from previous quarters can be Fig. 1.3: Risk and Return by Strategy (Vintage 2001 - 2011) breaking records for fundraising and linked to the improved exit opportunities and transaction volume year on year. The high valuations in recent times. 25% growth and maturation of the secondary Balanced market has been tracked by Preqin over Consistent Performers Buyout time, as has the increasing number of 20% Distressed Private Equity investors that have expressed an interest The importance of fi nding consistent Fund of Funds in buying or selling fund stakes in order to performing fund managers is crucial for any Growth reap a range of benefi ts. For sellers, this investor that wants maximum reassurance 15% includes meeting liquidity requirements, that their fund commitment will be in safe Infrastructure portfolio rebalancing, and the opportunity hands. Though past performance is no Mezzanine to exit poor performing funds. For buyers, guarantee of future returns, data such 10% Natural Resources secondary market purchases will help as the performance metrics available on Real Estate mitigate the J-curve effect inherent in private Preqin’s Performance Analyst are highly equity commitments, and provide access to valuable tools to help benchmark funds and 5% Secondaries top performing managers and chances to inform LP decisions. Venture Capital acquire fund stakes at a good discount to Risk - Standard Deviation of Net IRR (%) Risk - Standard Early Stage NAV. Preqin’s tables of consistent performing 0% managers, featured in the 2014 Preqin 0% 5% 10% 15% 20% Highs and Lows of Venture Capital Private Equity Performance Monitor, can Return - Median Net IRR (%) Performance help with this task. Each fund that Preqin Fig. 1.4: Rolling One-Year Horizon IRRs by Fund Type has performance data for is assigned a On the other side of the spectrum, we fi nd quartile ranking using Preqin’s Performance 30% early stage funds with a much less attractive Analyst online service, which contains risk-return profi le. However, the high performance data for over 7,000 private 25% standard deviation in the chart highlights equity funds worldwide. These rankings are All Private the wide range of net IRRs that can be based upon the peer group of each vehicle 20% Equity attained, and therefore suggests that early and take into account vintage year, strategy Buyout 15% stage funds still offer the potential of hitting and geographic focus. Both the multiple and a lucrative ‘home run’ investment. IRR are used as key indicators and equal 10% Horizon IRR Venture emphasis is placed on both metrics. Capital 2013 saw an uptick in venture capital 5% performance as a whole. Fig. 1.4 depicts Fig 1.5 shows a list of the top six consistent 0% the rolling one-year horizon IRRs for the performing buyout fund managers and their whole private equity industry, as well as average quartile rank. Funds ranked in the buyout and venture capital. Venture capital top quartile are given a score of one, funds outperforms its buyout counterparts and the in the second quartile are scored a two, whole private equity asset class with a return and so on. The table is compiled using only of 19.7% in one year to December 2013. funds for which Preqin holds performance 1 Year to Jun 2013 1 Year to Jun 2012 1 Year to Jun 2011 1 Year to Sep 2013 1 Year to Sep 2012 1 Year to Mar 2013 1 Year to Mar 2012 1 Year to Mar 2011 1 Year to Dec 2013 1 Year to Dec 2012 1 Year to Dec 2011 1 Year to Dec 2010 1 Year to Sep 2011 2 © 2014 Preqin Ltd Executive Summary - Sample Pages data and has assigned a quartile ranking. celebrating over a decade of providing Additionally, multiple sources are used to Additionally, 2012, 2013 and 2014 vintage net-to-LP returns data to the private equity ensure accuracy. We hope that you fi nd this funds have been excluded as these funds community. This edition contains key metrics year’s edition of the Performance Monitor to are too early in their fund lives to generate for over 7,000 funds, representing 70% of be a useful and effective tool and, as ever, meaningful IRRs. The list only includes fund the total capital raised by the industry. welcome any feedback that you may have. managers that have raised at least three funds of a similar strategy. This edition of the Performance Monitor features the PrEQIn Private Equity Four buyout fund managers, Rhone Quarterly Index, regional performance of Capital, Altor, Wynnchurch Capital Partners private equity funds, and 10-year horizon and Trilantic Capital Partners have all IRRs, as well as analysis of private equity of their funds ranked in the top quartile, performance by fund type, size and region. and therefore have achieved the best In addition, the Monitor explores the effects possible average quartile rank of 1.00. of past performance on private equity Morgan Stanley Global Private Equity and fundraising, performance benchmarks for Waterland follow, each with a score of 1.20. the different fund types, regions and vintage Extended lists of consistent performing fund years, as well as an analysis of listed private managers, broken out into various fund equity performance, synthetic IRRs for types, are available in Chapter 3 of the private equity funds of funds, dry powder Performance Monitor. and assets under management, and more. The 2014 Preqin Private Equity Preqin gathers its performance information Performance Monitor directly from both fund managers and investors, ensuring that the full spectrum We are proud to be launching the eleventh of private equity fund performance is edition of the Performance Monitor, observed, be it positive or negative. Fig. 1.5: Top Six Consistent Performing Buyout Fund Managers Firm Location Overall Number of Funds Number of Funds in Top Number of Funds in Average Quartile Rank with Quartile Ranking Quartile Second Quartile Rhone Capital US 3 3 0 1.00 Altor Sweden 3 3 0 1.00 Wynnchurch Capital Partners US 3 3 0 1.00 Trilantic Capital Partners US 3 3 0 1.00 Morgan Stanley Global Private Equity US 5 4 1 1.20 Waterland Netherlands 5 4 1 1.20 3 © 2014 Preqin Ltd The 2014 Preqin Private Equity Performance Monitor A comprehensive guide to private equity performance Contents - Sample Pages Contents 1.
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