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US maintains leadership in VC performance, consolidates LBO

Friday, July 31, 2020
Opalesque Industry Update - eFront, the leading financial software and solutions provider dedicated to Alternative Investments, has published its latest annual Global Private Equity Performance Series, which shows that the US has preserved its position as the best-performing VC market globally, while performance in its LBO market remains stable.

Overall, 2019 was a positive year for global private equity performance, with most regions seeing rising returns as well as falling risk.

The US preserved its position as the best-performing VC market globally with an IRR of 14.3%, however, a significant part of this result can be explained by the golden VC era of two decades ago.

Leaving these funds aside, the active pool of funds improved their performance since last year, reaching a TVPI of 1.65x and an IRR of 8.2%.

The overall TVPI of US LBO funds, meanwhile, remained stable year on year, at 1.58x, representing an extremely attractive market from a risk-return The IRR of active and liquidated funds fell on aggregate by just 14 basis points to 12.1%.

Elsewhere, Western Europe consolidated its global lead in private equity, with LBO funds further improving their performance during 2019.

Selection risks also decreased, pushing the region further above the trendline from an already favourable position, and making Western Europe the most attractive region globally for private equity on a risk-return basis.

Chinese and Hong Kong LBO funds, meanwhile, are positioned well above the trendline, with an IRR of 9.9%, signifying strong performance, and a notable decline in risk over the past year, contributing to an already attractive risk-return profile.

2019 was a positive year for global private equity performance, with most regions seeing rising returns as well as falling risk. In fact, every market operating below the risk-return trendline saw performance improvements during the year, with the exception of Eastern Europe and Russia.

It was also the year the Nordics overtook traditional leaders Benelux and the UK, to become the world's top performing private equity market, helping Western Europe consolidate its global lead in private equity (see Figure 1). However, despite the positive performance overall, this was in a year in which a number of the very top performers saw modest declines in returns, including the UK, the US, Benelux and the Nordics, as well as China and Hong Kong.

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