March 8th, 2023 – eFront, the leading financial software and solutions provider dedicated to private markets, and a part of BlackRock, has released its latest eFront Insight Quarterly Performance Benchmark report, covering the period to the end of Q3 2022.
The report shows that in the first three quarters of 2022, returns for private markets dropped to below zero for the first time since the outbreak of the Covid-19 pandemic in Q1 2020. In Q3, global buyout funds fell by -2.4%, following losses of -1.2% and -3.7% in the first and second quarters respectively. Global venture capital investments lost -2.3% of their value, following even larger drops of -4.4% in Q1 and -8.6% in Q2 (Figure 1).
After the initial shock brought on by the Covid-19 pandemic, the private equity market bounced back to multi-year highs for a sustained period. The end of 2021 saw a return to historical averages, however, in Q1 2022, in part as a result of the shock to markets in the wake of Russia’s invasion of Ukraine, returns slumped.
As of Q3 2022, the private equity segment is delivering negative returns for the third consecutive quarter. Relatively better returns of natural resources and infrastructure investments mitigated the overall performance of private markets in the first three quarters of 2022 (see Table 1).
Investment-to-date view paints a similar picture. The most recent vintage years have been adversely affected the most, but this impact has been particularly noticeable with the funds in the lower performance brackets.
J-Curves illustrate the progression of fund performance over the active life of the fund. More recent vintage years experienced a slowdown in performance over the past three quarters, but they peaked at the record levels previously seen with a post-crash vintage year of 2009 (see Figure 2).
Following the bullish episode in 2021 with spiking levels of calls and distributions, the first three quarters in 2022 brought a correction in cash-flow dynamics (see Figure 3).
For the full report, click here.