Private Equity & VC Cash Flows Set To Decline From 2014 Levels

Written by PitchBook

Introduction

As more funds data from 2015 rolls in, a more comprehensive, holistic picture of the current investment landscape for private equity and venture capital investors emerges. Let’s take the most recent installment of private equity cash flows data. Limited partners are still raking in hefty distributions from general partners, as the seller’s market that persisted throughout last year has produced rich rewards. However, heightened valuations cut both ways, leading to a competitive, expensive environment for PE dealmakers, which is a primary factor cutting into contributions currently.

Those same heightened valuations have been, if anything, even more pronounced for the venture industry. 2014 saw massive distributions back to LPs by venture fund managers, but 2015 is already setting an even more torrid pace in terms of both contributions and distributions, reflective of the hefty sums VCs were, and in some cases still are, paying out.

As we have seen for both PE and VC, the dealmaking landscape has shifted considerably in recent months. Coupling our analysis of PE and VC investment trends with this most recent set of benchmarking data, accordingly, will help inform your analysis for an even richer picture of the forces shaping the dealmaking environment. As a final note, all the funds return data within this report is as of June 30, 2015; the lag is due to reporting cycles.

KS PME Benchmarks

When using a KS PME, a value greater than 1.0 indicates outperformance of the public index (net of all fees). For example, the 1.12 value for 2005 vintage private equity funds means investors in a typical vehicle from that year are 12% better off having invested in PE than if they had invested in public equities over the same period.When using a KS PME, a value greater than 1.0 indicates outperformance of the public index (net of all fees). For example, the 1.12 value for 2005 vintage PE funds means investors in a typical vehicle from that year are 12% better off having invested in PE than if they had invested in public equities over the same period.