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ILPA: Secondaries returns fall in Q1

The average net IRR for secondaries funds in the first quarter was down but long-term returns remain flat.

Short-term returns for global secondaries funds fell in the first quarter of 2015, according to data from the Institutional Limited Partners Association released last week.

Secondaries funds generated a pooled net internal rate of return of 1.05 percent, down from 2.04 percent in the fourth quarter of 2014 and down from 1.49 percent in the first quarter of 2014, according to ILPA Private Markets Benchmark.

Secondaries funds underperformed compared to most other strategies in the first quarter. The ILPA All Funds Index, which combines all strategies including private equity, venture capital and funds of funds, generated an average net IRR of 1.58 percent. This is down 2.01 percent in the fourth quarter of 2014 and from 3.21 percent in the first quarter of 2014.

One of the best performing strategies was Asia and Pacific private equity and venture capital, which generated a 5.24 percent net IRR in the first quarter of 2015. One of the worst performing strategies was natural resources, which generated a negative 2.71 percent net IRR in the first quarter of 2015.

Over longer time periods, secondaries funds lagged behind all strategies combined. They registered a 10-year net IRR of 11.46 percent, lower than the 11.86 percent 10-year net IRR generated by ILPA All Funds Index. But this is roughly unchanged from the fourth quarter’s 10-year net IRR of 11.45 percent for secondaries.

The ILPA data is based on returns for 3,254 funds as of 31 March 2015.