Given we’re at the midpoint of the 2020s, it’s a good time to check on the vintages of the mid-2010s—specifically 2013-2015—that are reaching a typical realization horizon.
To understand how these vintages are shaking out a decade on, we’re analyzing the dispersion of IRRs across different performance breakpoints. First, we look at the fund count of buyouts and then compare buyouts on a percentage basis against all non-buyout strategies to see where they stand out against the broader market.
Buyouts most often fall in the 8% - 14% or 14% - 20% range with 63 funds in each, which combined account for exactly half of all buyouts for these vintages.
This isn’t the most surprising outcome, as an 8% - 20% return may be the expected range for an average private investment. We see a pronounced divergence when comparing buyouts to the broader markets, with over half of buyouts falling in the brackets from 14% to greater than 26%, compared to 33% for all other types. These nice round numbers mean that LPs had a little better than 50/50 chance of getting a 14% or better return from a mid-decade buyout, as opposed to a 1/3 chance for other strategies.
Buyouts are seen as a reliable source of outperformance for an LP’s portfolio. Our charts show this is the case across different environments, with buyouts still skewing towards higher performance, even through a decade that weathered the COVID pandemic and the subsequent recession at the midway point.
Digging deeper into the "All Other Funds" grouping in our second chart, there are three main investment types concentrated in the 2% - 14% range: credit, infrastructure, and real estate. As three of the larger non-buyout strategies, these were likely to have an outsized impact on the cohort’s performance.
There are possible ties to the uncertainty of the COVID economy, which may have tempered performance for these strategies more so than others. With that said, as we continue moving past these market conditions we will see if these funds can create more positive value and push their bell curve more to the right.
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