Private equity returns are continuing to dip, with a 4.8% median net internal rate of return for funds raised in 2015, 360 basis points lower than 2014 vintage funds and more than 720 basis points lower for 2011 vintage funds, according to performance data from PitchBook Benchmarks, a new PitchBook report expected to be launched on Thursday.
Returns are being moderated by more managers investing capital in 2015 and more capital in the market, said Nizar Tarhuni, Seattle-based analyst manager at PitchBook.
Private capital — including private equity, venture capital, real assets and debt strategies — earned a net IRR of 13.07% for one year, 11.65% annualized for five years and 8.33% annualized for the 10 years ended March 31, according to PitchBook.
Private equity earned the highest return of the four strategies, with 17.15% net IRR for one year, 12.34% for five years and 9.48% for the 10 years ended March 31. Venture capital returned 5.79% net IRR for the one year, 11.84% for five years and 9.48% for the 10-year period.
Real assets earned a 7.67% net IRR for one year, 10.95% for the five years and 4.53% for the 10 years ended March 31. Debt earned 8.99% for one year, 10.12% for the five years and 8.44% for the 10 years.
Even though secondary markets had some of the highest returns — 26.25% net IRR for the one year, 16.83% for five years and 16.63% for the 10 years ended March 31 — those figures are skewed because those markets are dominated by the larger, multibillion-dollar funds, Mr. Tarhuni said.
When secondary returns are equal-weighted between larger and smaller managers, the IRR was 9% for one year, 10.16% for five years and 9.62% for the 10 years ended March 31. Private equity on an equal-weighted basis earned a 12.95% IRR for one-year, 11.22% for five years and 9.91% for 10 years.
