PitchBook Benchmarks continues its cash flow series to examine the contributions of private market strategies


SEATTLE, March 5, 2020 /PRNewswire/ — PitchBookthe leading data provider for the private and public equity markets, today released fund performance data through Q2 2019 from its standalone performance measurement product, PitchBook Benchmarks. Comprehensive performance data is designed to help Limited Partners (LP) and General Partners (GP) better understand the performance of private market funds relative to broader asset classes and other private equity and capital strategies -risk. Private market performance analyzes tend to focus on how the GP generates returns, but the treatment of uncalled capital is also critical when evaluating the total return of a private market allocation. An LP’s decision to commit to a fund often comes several years before capital is transferred to the GP for investment, creating a challenge for LPs who must balance the need to meet capital calls and the desire to maximize returns. The first three installments of PitchBook’s Basics of Cash Flow Management series focused exclusively on private equity funds (primarily buyout and growth vehicles), and future installments will expand on these initial analyzes to compare cash flow profiles. cash from other private market strategies. In this edition, PitchBook analysts provide focused analysis of drawdown rates for venture capital, private debt, real assets, funds of funds (FoFs) and secondaries.

PitchBook Benchmarks PDF and Excel data packs are available for download here.

“There are several considerations to take into account when evaluating the cash flows of private market funds, but we can make some general generalizations that tend to distinguish the different strategies,” said James Gelfer, senior strategist at PitchBook. “Understanding how these funds draw and deploy capital in isolation is important, but this is only the first step for allocators who have diversified private market portfolios and the next installment in our series will dig deeper into the distributions for these strategies.”

PitchBook reviewed cash flow data to provide targeted draw rate analyzes for venture capital, private debt, real assets, funds of funds and secondaries. Main takeaways include:

  • More than 80% of venture capital funds will call up capital in any given quarter during the first three years of the investment period, compared to about two-thirds for traditional private equity funds. Venture GPs tend to call capital later in the life of their funds, with 6.5% calling at least 1% of total commitment in year 10, the highest of any investment strategy direct.
  • Private debt vehicles tend to experience the fastest withdrawals of any private equity strategy, calling on average more than 60% of their total commitment in the first two years, compared to around 50% for real assets and only 37% for private equity.
  • On average, real asset funds have the second fastest drawdown rate of any strategy, with over half of committed capital called in year 2 and over 80% in year 4.
  • FoFs have one of the most distinct drawdown profiles of any private market strategy and exhibit a steady pace of capital deployment throughout the investment period with lower capital calls on average. It’s understandable that FoFs have taken longer to start calling in capital, but we’ve seen evidence that FoFs are more effective at deploying capital as the strategy has matured.
  • Secondary funds fall in the middle of the pack when evaluating drawdown rates in private market strategies. The somewhat nascent nature of the secondary market – underscored by minimal levels of competition and low use of leverage – is evident in the relatively rapid offtake rates of early vintages.

Check out previous episodes of the Cash Flow series:
Cash Management Basics: Private Equity Contributions
Cash Flow Management Basics: Private Equity Distributions
Basics of Cash Flow Management: Construction of Allocation

For more information on the PitchBook, click on here.

About PitchBook
PitchBook is a financial data and software company that provides capital markets transparency to help professionals discover and execute opportunities with confidence and efficiency. PitchBook collects and analyzes detailed data on the entire venture capital, private equity, and M&A landscape, including public and private companies, investors, funds, investments, exits, and people . Company data and analysis is available through the PitchBook platform, industry news and in-depth reports. Founded in 2007, PitchBook has offices in Seattle, San Francisco, New York and London and serves more than 37,000 professionals worldwide. In 2016, Morningstar acquired PitchBook, which now operates as an independent subsidiary.

SOURCE Pitch Book

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