Younger private equity firms performed more than three times better than their older counterparts, according to the European Venture Capital Association. Conducted by p.e. investor Pantheon, the study found that buy-out funds that debuted three to five years ago grew by more than 20% in 2005, compared with a 6% return by funds founded between 1998 and 2000. “It is counter-intuitive,” John Barber of Helix Associates told Financial News. “You would have thought older funds would have been more mature with a greater proportion of realizations. However, younger funds with less-mature assets have been able to take advantage of...extraordinary conditions to release capital earlier than expected.” Those conditions include low interest rates, which make refinancing more profitable, FN reports. Pantheon partner Serge Raicher in a FN interview said the high performance rate for the young’uns is coming “mainly from cash distributions.” “What is unusual and impressive,” he said, “is the rate at which recent vintages are returning cash to investors, locking internal rates of return,” which Raicher says is the industry benchmark. Private equity firms have cut the average period before recapitalizing a business from 29 months to 20, Raicher said.
