Q4 Good To PE Performance

For the first time in three years, quarterly venture capital returns posted a positive one-year return, according to the latest performance figures produced by Thomson Venture Economics (publisher of PE Week) and the National Venture Capital Association.

The fourth quarter of 2003 posted a positive venture capital one-year return of 8 percent. Meanwhile, the total private equity asset class (which includes venture capital, buyouts and mezzanine funds) posted a strong 18.3% performance in the fourth quarter, representing the second consecutive positive quarter for the asset class (see chart).

Without a doubt, the last few years have been difficult for the private equity community. But the figures are an indicator that private equity performance is showing some signs of stability, thanks in large part to an increase in IPOs and M&A activity, which have helped strengthened performance data.

“There is reason to think that continued increases are sustainable if the IPO and M&A exit markets continue to improve,” says Jesse Reyes, vice president at Thomson Venture Economics.

While a small part of some of the increase can be attributed to improved valuations in existing portfolio companies, the majority of the increase is the result of distributions to limited partners. This has to be positive news for GPs going back to LPs for fund-raising.