Which private market strategy generated the highest and lowest returns during the 10Y horizon?
The leading strategies were related to equity-like investments, and all three strategies significantly benefited from multiple expansion, cheap financing and economic growth:
1) Growth expansion – 17.9% p.a.
2) Buyout – 16.1%
3) Venture Capital – 16.1%
Funds of Funds (FoF) and Secondaries occupied the subsequent positions. These approaches typically encompass a combination of strategies such as growth equity, buyout, VC, and real estate. They have achieved average returns of 14.1% and 13.5% respectively.
Real estate (value added, opportunistic) and Infrastructure asset classes benefited from low-interest rate environment and generated between 10.2-12.8%.
Private Debt funds managed to generate an IRR of 8.1% since 2015, while the base rate was at historical lows (LIBOR) or below zero (EURIBOR). Private Debt returns break down into base rate + credit spread + original issue discount. An increase in the base rate is likely to enable the Private Debt asset class to enjoy 10-12% IRR.
Oil & Gas, a subgroup of real assets, enjoyed spectacular returns last year, but overall 10Y performance put them into the last position with 4.7% IRR.
What are your thoughts on the winning strategies for the upcoming decade?
Source: PitchBook / #AssetAllocation #AlternativeInvestments #markets
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