Private equity funds returned a grim -9.2 per cent in the year to Sept. 30, reports industry tracker Preqin, trailing a wider rebound in stock markets.
The silver lining is that the -9.2 per cent overall industry return represents a "significant improvement" compared with one-year performance to June 30, 2009 of -24.1 per cent, Preqin said.
Economists refer to a trend of things getting less bad as the "second derivative," and make a big deal about it being a leading indicator of rebound. Private equity limited partners, who are less inclined to be theoretical about returns, are not as likely to be comforted.
To justify their fees, PE managers are going to have to make sure LPs focus on the long term. On a three-year basis, returns of 3.6 per cent have beat the S&P 500 and European stocks, and five-year returns of 20.0 per cent beating all the public indexes Preqin examined.