PitchBook, the premier data provider for the private and public equity markets, released fund performance data through 3Q 2019 from its stand-alone performance measurement product, PitchBook Benchmarks. The comprehensive performance data is designed to help limited partners (LPs) and general partners (GPs) better understand private market fund performance relative to broader asset classes and other PE and VC strategies. The previous installment of PitchBook’s Basics of Cash Flow Management series investigated capital call rates across the private market strategies to provide insight into how LPs can better manage the uncalled portion of their private capital commitments. Contributions are only one side of the equation and to maintain an allocation over time, LPs must also grapple with the challenge of reinvesting capital as it is distributed. In this edition, PitchBook provides targeted analysis of distributions for venture capital, private debt, real assets, funds of funds (FoF) and secondaries.
The PitchBook Benchmarks PDF and Excel data packs are available for download here.
“Distributions are highly dependent on the specific funds and the success or failure of the underlying deals in question. Data can be informative in understanding broad trends over time, but it can be challenging to extrapolate answers from historical data given the unprecedented levels of uncertainty and ongoing market intervention,” said James Gelfer, senior strategist at PitchBook. “Despite this ambiguity, we think that distributions will fall for private market strategies in the near to medium term as traditional exit avenues close. However, fund managers now have more levers than ever before to tap liquidity, including new developments in secondaries markets and lending structures to unlock cash while remaining invested.”
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PitchBook reviewed aggregate and absolute performance data to provide targeted analyses of distributions for venture capital, private debt, real assets, fund of funds and secondaries. Key takeaways include:
- Distribution rates have accelerated for every private fund strategy over the last decade, with newer vintages returning more capital earlier in the fund’s life.
- There are fundamental differences in distribution profiles across private market strategies. Private debt and real asset funds, which often have income-producing features, produce distributions and reach full liquidation more quickly than other strategies. Secondaries funds are also quick to produce initial distributions but tend to have long tails, as they often have exposure to a multitude of underlying positions given the nature of the strategy.
- Distribution rates have exhibited significant cyclicality, with a high correlation to broader macroeconomic conditions. This correlation is expected to persist amid the market disruptions in the first half of 2020, leading to a slowdown in near-term distributions from the historically high levels of recent years.
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