LBO performance reaches 10-year high

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eFront’s latest quarterly private equity data shows that LBO performance reached a 10-year high in 2017, while overall risk levels reduced and average time to liquidity improved.

 eFront Insight quarterly report: key highlights

  • LBO funds posted their best performance in a decade in 2017
  • Multiples on invested capital of active private equity funds reached an all-time high in Q3 at 1.486x, marking the ninth year of improving performance from a low of below 1.1x in 2009
  • Overall risk continues to reduce, as measured by TVPI spread, stabilising at 1.313x - close to the all-time low of Q2 2017 (1.275x) and well down on figures of 1.7x-plus seen in 2008/09.
  • Fund selection risk also fell, with returns deviation between the best and worst performers dropping sharply
  • Average time to liquidity improved, reaching 3.27 years – down from nearly 4 years in 2015

Thibaut de Laval, Chief Strategy & Marketing Officer of eFront, commented:

“Thanks to our fund performance data and analytical platform, we can conclude that 2017 was another exceptional year for LBO funds, despite a slightly lower Q4 compared to previous quarters.  Performance, risk and time to liquidity all improved. The asset class is as attractive as ever, and is likely to continue to attract more capital, putting more pressure on managers to sustain this performance. We expect this trend to continue as long as the bull market lifts net asset values.”

The report also confirmed a stabilization of US fund performance, while for European funds, the last quarter of 2017 was marked by a continuation of the decline of Q3, following a very strong progression in Q2.

Overall, latest performance recorded by vintage year 2009 funds confirms this was an exceptional year, while 2010 is expected to underperform the long-term average. The performance is more contrasted between the two regions in following vintage years.

Click here to download full report: Private Equity Performance Overview