U.S. private equity and venture capital funds outperformed public equity in 2015, said a report from Cambridge Associates released Monday.
The Cambridge Associates U.S. Private Equity index and the U.S. Venture Capital index returned 5.9% and 12.9%, respectively, in 2015, ahead of the Nasdaq Composite index, the S&P 500 and the Russell 2000, which returned 5.7%, 1.4% and -4.4%, respectively, for the year.
However, returns for the private equity and venture capital indexes were down from previous years. Last year marked the lowest annual return for the private equity index since 2008, when it returned -23.47%, and lowest annual return for the venture capital index since 2012, when it returned 7.23%. In 2014, the private equity and venture capital indexes returned 11.3% and 21.5%, respectively.
A weak fourth quarter dampened the calendar-year returns. Cambridge’s private equity and venture capital indexes returned 0.5% and 1.6%, respectively, in the fourth quarter of 2015, below the Nasdaq, S&P 500 and Russell 2000 at 8.4%, 7% and 3.6%, respectively.
In the three, five, 10, 15, 20 and 25 years ended Dec. 31, the private equity index returned 13.3%, 13%, 11.2%, 10.9%, 12.8%, and 13.3%, respectively, and the venture capital index, 21.2%, 16.2%, 10.9%, 4.2%, 31.1% and 25%.
The private equity index outperformed the Nasdaq, S&P 500 and Russell 2000 in all of those periods, excluding the three- and five-year periods. The venture capital index outperformed the Nasdaq, S&P 500 and Russell 2000 in all of those periods excluding the 15-year period.
For the second consecutive year, health care and energy were the best- and worst-performing private equity sectors, returning 29.2% and -20.1%, respectively.
Fund managers in the private equity index called $78.3 billion total from their limited partners in 2015 and distributed $140.6 billion, down 10.3% and 11.2%, respectively, from 2014.
“Despite a somewhat muted environment for initial public offerings and merger and acquisition activity, and the fallout from energy companies’ weak performance, private equity funds still bested public markets over the course of 2015,” said Keirsten Lawton, managing director and co-head of U.S. private equity research at Cambridge, in a news release. “The year also marked the fourth consecutive year in which over $100 billion was returned to investors in the benchmark.”
Looking at venture capital, the top-performing sectors continued to be health care, software and information technology, returning 25.6%, 13.7% and 11.2%, respectively, in 2015. The annual returns for the top performers were driven by valuation increases of more than $10 billion for health-care companies and more than $4 billion for software and IT over the year, according to the report.
Fund managers in the venture capital index called $15.3 billion total from their limited partners last year and distributed $28 billion, down 7.5% and 12.3%, respectively, from 2014. Despite the year-over-year decline, 2015 marked the third-highest annual distribution level of all time, behind 2014 at roughly $32 billion and the bubble year of 2000 at $57 billion, Cambridge said.