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Alternative Market Briefing

U.S. venture capital funds: Strong performance, but slowing capital distributions

Thursday, May 21, 2020

Laxman Pai, Opalesque Asia:

US-based venture capital funds have posted strong performance over the past decade, said a study.

According to Preqin and the First Republic update of Q1 2020, the US-based venture capital funds of vintage 2010 have consistently delivered median net IRRs above 12%.

All vintages up to and inclusive of 2016 record positive IRRs for even the lower quartile boundary.

And while lower-quartile vintage 2017 funds are currently posting negative returns, it is anticipated that these will improve with time as these funds' investments mature in the coming years.

Throughout H1 2019, US-based venture capital managers called up an estimated $35bn of investor capital, meaning activity in 2019 is on course to reach record annual figures for the sixth consecutive year.

On the other hand, distributions appear to be slowing. With $22bn in capital distributions recorded over H1 2019, the annual level may fall short of the record $46bn distributed in 2018.

The negative net cash flow to investors in H1 2019 follows two consecutive years of similar activity.

The slower distributions may indicate that fund managers are waiting for more favorable market conditions before exiting existing investments.

The majority of top-performing vintage 2010-2017 venture capital funds in the US target investment in North America.

Two Asia-focused funds managed by California-based DCM, while the top-performing fund in the period analyzed - CRCM......................

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