Global Fund Performance Report
According to PitchBook’s Q1 2023 Global Fund Performance Report, "the excesses of 2021 are now being walked back in private market fund performance. Every one of the strategies save real assets posted a one-year horizon IRR through March 31, 2023, that was lower than its five- or 10-year average. Real assets never hit the astronomical heights of some of the other strategies in 2021, and so did not have the excessive unrealized gains to write back down. Preliminary figures for Q2 2023 do not show a recovery, save for a surprisingly good result from funds of funds (FoF). That said, reported results for FoF tend to lag those of primary funds, so it was expected that preliminary return to come into closer alignment with the private capital numbers as more results come in. Longerterm performance shows that VC has given back enough in recent returns to cause its three-year figure to now be well below that of PE—a marked shift from their relative positions just last quarter.
Until 2020, NAV was almost always a negative component of quarterly returns in the private markets—the reason being that as an investment moves from unrealized to realized, the remaining NAV of the total portfolio will decline while total distributions will increase. In 2020, however, that relationship changed across many strategies. Portfolio holdings in funds were being written up even as distributions were largely in normal ranges. The markups turned to markdowns in Q3 2021, leading to a reversal in valuations as a positive contributor to return. At the same time, distributions slowed markedly, leading to overall returns well below typical levels.
Despite the ups and downs seen across the private capital strategies, in the period from 2016 through the pandemic and up to today, several have outperformed the S&P 500 index. PE, VC, FoF, and secondaries have all done better, even with the recent declines in private markets and the two-quarter uptick in public indexes. The other strategies—real estate, real assets, and private debt—have underperformed public equities over the same period, but they also saw much lower volatility during the uncertainties experienced since the start of 2020."
