‘Once-in-a-decade’ events are becoming more and more common, but avoiding them altogether is just one way of protecting portfolios. ART is building new capabilities to absorb their impact – and come back from them even stronger.
With almost 50 per cent of its nearly $100 billion FUM now internally managed, Cbus has seen fees come down and gained more control over its ever-growing portfolio. But in hindsight it “could have pushed a bit harder”.
Venture down but other PE strategies make progress
(pictured: Will Kinlaw)
Venture capital has not done well this year, according to the latest State Street private equity index, however the two other main categories in the private equity space – buyouts and private debt – have been in positive territory.
Venture, due to its cyclical nature, remains a strong diversification mechanism, according to the State Street quarterly report on its private equity data – which dates back to 1980 – published last week. In the first quarter of 2016, the private equity index saw an overall return of 0.65 per cent.
Will Kinlaw, senior managing director and global head of State Street Associates, a division of State Street Global Exchange, said: “During the first quarter of 2016 the return on US-focused funds remained flat from the fourth quarter of 2015… Due to the lag in valuation reporting, this release does not yet include the UK’s decision to leave the European Union in late June 2016, but ahead of Brexit, European-focused private equity funds posted another strong quarter.”
The public market uncertainty and larger macro-economic concerns likely caused the decline in returns for venture capital during the quarter.
Additional first-quarter observations from the State Street analysis include:
- The return of US-focused funds remained unchanged from the previous quarter. Among all three main strategies, Venture Capital posted a loss of -2.06 per cent, while buyout and private debt funds recorded 0.67 per cent and 0.32 per cent gains, respectively. For the one-year return, US private equity funds recorded a 2.8 per cent gain.
- The rolling one-year return of venture capital presented a downward trend, dropping to 5.86 per cent in Q1 2016 from 29.4 per cent at its peak in Q2 2014
- Although European-focused private equity funds booked another strong quarter (3.51per cent in US dollar-denominated return) this is due to a tailwind from the exchange rate. The EUR-denominated return was -1.26 per cent, with the EUR appreciating about 4.9 per cent in Q1 2016, then dropping 2.5 per cent in Q2.
- In terms of cash flow ratios, European-focused funds have the most exit activity over the past three years, with a distribution to commitment (DCC) ratio of 1.18.
Meanwhile, funds in emerging markets and the Asia-Pacific region have more new active deals than the other regions, with a paid-in capital to commitment (PICC) ratio of 1.10.
