U.S. Private Equity Index Returns (%) for the Periods ending June 30, 2009
Six 1 3 5 10 15 20
For the periods ending Qtr. Months year years years years years years
----- ----- ----- ----- ----- ----- ----- -----
June 30, 2009 4.3 1.1 -20.6 0.9 9.9 7.7 11.1 11.4
----- ----- ----- ----- ----- ----- ----- -----
Other indices at June 30, 2009
DJIA 12.0 -2.0 -23.0 -6.3 -1.7 -0.4 8.1 9.0
----- ----- ----- ----- ----- ----- ----- -----
Russell 2000 Composite 20.7 2.6 -25.0 -16.6 -1.7 -2.4 6.5 7.3
----- ----- ----- ----- ----- ----- ----- -----
S&P 500 15.9 3.2 -26.2 -8.2 -2.2 -2.2 6.9 7.8
----- ----- ----- ----- ----- ----- ----- -----
Source: Cambridge Associates LLC
U.S. Venture Capital Index Returns (%) for the Periods ending June 30, 2009
Six 1 3 5 10 15 20
For the periods ending Qtr. Months year years years years years years
----- ----- ----- ----- ----- ----- ----- -----
June 30, 2009 0.2 -2.6 -17.1 1.3 5.7 14.3 36.3 22.7
----- ----- ----- ----- ----- ----- ----- -----
Other indices at June 30, 2009
NASDAQ Composite 20.1 16.4 -20.0 -5.5 -2.2 -3.7 6.6 7.5
----- ----- ----- ----- ----- ----- ----- -----
Russell 2000 Composite 20.7 2.6 -25.0 -16.6 -1.7 -2.4 6.5 7.3
----- ----- ----- ----- ----- ----- ----- -----
S&P 500 15.9 3.2 -26.2 -8.2 -2.2 -2.2 6.9 7.8
----- ----- ----- ----- ----- ----- ----- -----
Source: Cambridge Associates LLC
Note: Because the U.S. Private Equity and Venture Capital indices are
capital weighted, the largest vintage years are the primary drivers of the
indices' performance.
"While the difficult economy continued to challenge investors in all asset
classes, including alternative assets, the rebound of the public markets
helped returns for both the PE and VC indices. Between the two, the PE
index benefited more because its underlying companies are more mature than
those in the VC index, and typically more closely resemble -- and, in some
cases, are -- public companies. Some funds in the VC index also benefited
from a slight uptick in IPOs in Q2. Of course, a recovery and improved
returns for PE and VC funds ultimately depend on a healthier economy and
increased liquidity in the forms of IPOs and mergers and acquisitions,"
said Andrea Auerbach, Managing Director at Cambridge Associates.
The Cambridge Associates LLC U.S. Private Equity Index is based on returns
data compiled for institutional quality funds that represent nearly
two-thirds of the capital raised by private equity partnerships between
1986 and 2009, while the Cambridge Associates LLC U.S. Venture Capital
Index® is based on returns data compiled for institutional quality funds
that represent more than three-fourths of the capital raised by venture
capital partnerships between 1981 and 2009.
In the PE Index, Seven of the Eight Key Industry Sectors Earned Positive
Results in Q2, with Healthcare Companies Topping the List
The PE index earned 4.3% in the quarter ending June 30, 2009. The index's
gains were largely the result of improved valuations for companies in
several of the industries hit hardest by the recession, including retail,
financial services, and energy.
"It's worth noting that for the first time since the
'mark-to-market'-valuation methodology was adopted by funds at the end of
2008, public market performance positively impacted valuations for
companies in the PE index," said Ms. Auerbach.
Seven of the eight industry sectors that collectively represented 90% of
the PE index's value earned positive results in the second quarter. Media,
the lone exception, fell only about 0.3%. The three largest industries by
size -- consumer, energy, and healthcare -- together represented more than
half of the PE benchmark's value; each sector rose between 3.4% and 4.4%,
with healthcare performing best.
PE Capital Calls Up in Second Quarter, But Distributions on Par with
Q1
Capital calls from PE managers increased during the second quarter, but
there was little change in distributions to their investors. PE managers
called roughly $7.4 billion in Q2, about $1.1 billion more than in Q1. New
investments have required more equity than those made in recent years due
largely to tight credit markets. The combination of the need to invest more
equity into new deals and the shortage of near-term exit opportunities has
contributed to the trend of capital calls outpacing distributions,
according to Cambridge Associates.
Funds launched in 2000 distributed the most money to investors during the
quarter -- roughly 30% of total distributions. Investors in the 2004-2008
vintage funds paid in the most capital, contributing more than 90% of the
capital called by PE fund managers.
VC Index Had First Positive Quarter Since Mid-2008, with Write-Ups for
Healthcare, IT, and Software Companies Responsible for Most of the Increase
in Valuations
The Cambridge Associates LLC U.S. Venture Capital Index rose modestly,
0.2%, in the second quarter -- its first gain since the second quarter of
2008. The 1999 vintage year venture capital funds were the best
performing, returning 3.5%, with earnings driven largely by increased
valuations and realizations in IT and software. The 1999 vintage, along
with five others -- 2000, 2001, 2004, 2005 and 2006 -- accounted for nearly
80% of the VC index's value.
Healthcare, IT, and software continued to represent nearly 75% of the
index's value. All three sectors earned positive returns for the second
quarter, with healthcare faring best with a 3.0% return, followed by
software and IT. Virtually all of the 2006 vintage funds' return was
earned through healthcare investments. The 2001 vintage funds were the
worst performers of the six vintages listed above, losing 1.5%.
VC Capital Calls and Distributions in Second Quarter Were Similar to Q1;
IT, Software, and Healthcare Companies Accounted for Most Distributions
The benchmark's VC fund managers called about $2.7 billion from investors
in the second quarter, and returned roughly $950 million, both numbers
closely mirroring the prior quarter. Several of the younger vintage years
-- 2004 through 2008, along with the 2000 funds -- together called 92% or
$2.5 billion of the funds called during the quarter.
Recession and Weak IPO Market Continued to Challenge VC Funds
While valuations for VC-backed companies benefited somewhat from the public
market rally, the difficult economy and a poor IPO market continued to
challenge venture funds.
"The recent shortage of profitable exit opportunities has caused managers
of many of the more 'mature' funds, such as those raised in 2000, to hold
companies longer, which reduces their internal rates of return," said Peter
Mooradian, Managing Director at Cambridge Associates. "We believe,
however, that the 2008 financial crisis could lead to a sustained and
meaningful industry shakeout that should improve the competitive
environment and entry valuations, other important components of the return
equation."
According to the National Venture Capital Association, there were 5 initial
public offerings and 64 mergers and acquisitions in the second quarter,
many of which involved IT companies.
About Cambridge Associates
Founded in 1973, Cambridge Associates delivers investment
consulting, independent research, and performance monitoring services to
approximately 850 institutional investors and private clients worldwide.
Cambridge Associates has advised its clients on alternative assets since
the 1970s and today serves its clients with more than 180 professionals
dedicated to consulting, research, operational due diligence, and
performance reporting on these asset classes. The firm compiles the
performance results for more than 3,900 private partnerships and their more
than 56,000 portfolio company investments to publish the Cambridge
Associates U.S. Venture Capital Index® and Cambridge Associates U.S.
Private Equity Index®, which are widely considered to be the
industry-standard benchmark statistics for these asset classes. The venture
capital data is used by National Venture Capital Association (NVCA) for its
quarterly benchmarks. Cambridge Associates has over 950 employees serving
its client base globally and maintains offices in Arlington, VA; Boston,
MA; Dallas, TX; Menlo Park, CA; London, England; Singapore, and Sydney,
Australia. For more information about Cambridge Associates, please visit
www.cambridgeassociates.com.
Contact Information: Media Contact: Adria Greenberg 212-255-8386 adria@sommerfield.com