LPs still expect strength from PE, but less than before

  • One-fifth of LPs expect returns of less than 11 pct in next 3-5 years
  • Four-fifths of LPs expect annual net returns of 11 pct and up from 2017-2022
  • Jitters around hard Brexit remain in the mix

From July 2015 to the end of March, the Regents of the University of California’s private equity portfolio realized more than $462.8 million in distributions. The nine-month windfall was driven by funds from the mid-aughts, especially 2007 vintages.

Olympus Partners outpaced the field and took gold with its 2007 vintage. Olympus Growth Fund V added the most over those nine months, bringing in $43.5 million. Next up was another 2007 vintage, Warburg Pincus’s Private Equity X. The fund generated $33.5 million for the Regents’ bottom line. Blackstone Group’s Capital Partners Sub-Fund V came in third by cashing out $30.5 million.

Bain Capital led the way for distribution percentage (cash out divided by cash in), with the top two funds of the time frame. Bain Capital Fund VIII, a 2004 vintage, turned out an 80.9 percent distribution. Bain’s third European vehicle from 2007 produced a 56.6 distribution percentage.  Bain Capital Europe III was also the fourth-highest fund in absolute distributions, returning $25.7 million.

Coming in third was Water Street Healthcare Partners’ maiden voyage from 2005. The debut churned out a 55.4 distribution percentage. Charlesbank Capital Partners saw its Equity Fund VII attain fourth place with a 50.6 percent distribution, and a notable 24.9 percent IRR.

All told, the Regents of the University of California’s PE portfolio has $6.7 billion committed to 126 active funds. Those active funds have combined for more than $4.8 billion drawn down, with $4.1 billion cashed out as of March 31, 2016.

The Golden Gate Bridge and the skyline of downtown San Francisco prior to Super Bowl 50 between the Denver Broncos and the Carolina Panthers. Photo courtesy Kirby Lee-USA Today Sports via Reuters.