Returns for secondaries funds rebounded in the third quarter of last year after falling into negative territory the quarter before, according to data from the Institutional Limited Partners Association.
The ILPA Secondaries benchmark, which tracks pooled net internal rates of return, returned 7.59 percent in the three months to 30 September, the data, released last Friday, show.
The figure, which is below the All Funds average of 10.06 percent, represented a strong recovery on the second quarter, when secondaries funds returned pooled net IRR of -1.75 percent – the only strategy to go into negative territory.
The negative performance could be because secondaries funds made a lot of investments in the first quarter priced off reference dates from the third- and fourth quarters of 2019, when net asset values and average pricing were high, said Cyril Demaria, affiliate professor at EDHEC Business School. These assets then had to be written down as a result of the pandemic.
“Instead of having distributions and a stable or increasing NAV, it could be that NAVs went down,” he said.
Despite the impact of covid-19, the ILPA All Funds benchmark returned 9.13 percent in the second quarter. This figure was buoyed by Asia-Pacific VC funds, which returned an average net IRR of 12.68 percent.
The strongest performing strategy in the third quarter was US and Canadian venture capital, which returned a net IRR of 12.69 percent.
ILPA’s performance data is based on the analysis of more than 4,000 private funds.
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