Buyout professionals of a certain age love to reminisce about the 1980s, when by many accounts it wasn’t unheard of for target companies to borrow $9 for every $1 in equity invested by their sponsors.
This golden age was no mirage, according to a recent survey of fund performance conducted by Buyouts. Based on an analysis of investment multiples, 11 of the top 48-performing partnerships in our database of 341 pre-vintage-2003 buyout funds date from the 1980s. It’s a remarkable fact given how few funds got raised in the 1980s compared with subsequent decades. In fact, our database contains just 16 vintage-1980s funds. Two-thirds of them cracked the top 48.
Another remarkable fact is how many of those 1980s funds were managed by
KKR’s 1985 fund produced an astounding 5.5x investment multiple for investors, and backer
To generate its top-48 list, Buyouts combined publicly-available return data from nine U.S. and Canadian public pensions and university endowments, with the largest cache coming from the
Altogether investors in our database have seen an estimated $55 billion of their commitments drawn down into some 548 pre-vintage-2003 buyout and distressed/turnaround funds, including ones deployed in Asia, Canada, Europe, Latin America, South Africa and the United States. Melting out duplicates produces a list of 341 global funds. From there, eliminating the international funds produces a list of 263 U.S. funds. The median investment multiple—defined as distributions plus estimated value of remaining holdings divided by contributed capital—for global funds that provide that data point is 1.6x—see table, this page. For the U.S. funds it is also 1.6x. The median IRR for the global fund collection is 14.4 percent while for the U.S fund collection it is 13.6 percent.
What percentage of funds lost money for investors? Thirty-nine, or 11 percent of the global funds in our sample, and 32, or 12 percent, of the U.S. funds, have generated investment multiples to date of less than one.