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- Private Equity buyout returns measured by multiples on invested capital (MOIC) – a simple cash-in vs. cash-out metric, have been falling since 2009.
- Interestingly internal rate of return (IRR), a time-weighted measure of return, has been rising.
- The reason is the increased use of subscription lines – managers financing investment with bank loans delaying capital calls to LPs until later.
- Mercer data suggests their use has grown 6x since 2010.
- Note also average and median returns don’t differ much.
- The note compares returns to public markets showing 1-5% pa excess returns, which have also fallen.
- Source.
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