Base Case Scenarios: More Insight Into PE Returns


October 24, 2013

Preqin says it has come up with a new product to benchmark private equity performance, which gives better insights than typical metrics such as the IRR and multiples.


The PrEQIn Private Equity Quarterly Index captures the returns earned by investors on average in their private equity portfolios based on the actual amount of money invested in private equity partnerships. An example of the number crunching potential is shown here in the two well-labelled graphics in from Preqin.


The PrEQIn Index data shows that with 2000 as the base year, mega cap buyout funds had outperformed the smaller buyout fund size strategies, before experiencing a large drop in returns in late 2008.


But the picture looks slightly different if the index is rebased to 2008. In that case, mid-market and small buyout sized funds have generated superior returns, possibly because the mega funds were impacted the hardest due to their leveraging and the liquidity crunch, says Preqin.


During this period the best returns were generated by the Mid-market buyout funds whereas the Mega buyouts were at the bottom of the heap. Mega buyout funds have since returned to being the top performer between Q2 2010 and Q1 2013.

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