Returns for secondaries funds fell in the second quarter of the year amid mixed results for all other strategies, according to data from the Institutional Limited Partners Association (ILPA).
The ILPA Secondaries Benchmark delivered lower returns than it did the previous quarter and a year earlier, data released by ILPA in November shows. Pooled net internal rates of return for quarterly, yearly, three-year, five-year and 10-year comparisons were all also lower than the ILPA All Funds Index, which benchmarks all strategies.
The slowdown in IPOs and M&A activity over the last 12 months has hurt buyout and venture capital strategies, and this is reflected in secondaries funds overweight in such funds, Laurence Allen, chief executive of advisory firm NYPPEX Private Markets, told Secondaries Investor. Buyers are also yet to lower their bids to reflect fewer distributions – as much as 50 percent in some cases – he said.
Fund of funds outperformed secondaries across all period comparisons except 10-year, where they delivered a 9 percent net IRR compared with 9.8 percent for secondaries. Secondaries performed best across a three-year period for the second quarter in a row, delivering a 9.9 percent return, down 3 percentage points from a year earlier.
US and Canadian private equity plateaued compared with the previous quarter, and fell compared with a year earlier, with the exception of across a quarterly comparison.
Asia-Pacific private equity and venture capital delivered the highest returns with 17.6 percent across a three-year period, almost 1 percentage point down from a year earlier.
Natural resources, which had a negative 11.4 percent return across a one-year period, has been the worst performing strategy since the first quarter of 2015.
The ILPA data is based on returns for 3,563 funds as of 30 June.