Looking at median IRR by different private market strategies gives us an overview of fund performance by vintage year. By leveraging updated Q3 benchmarks from Cobalt LP, we’re able to make assumptions about potential investment returns and keep our clients well informed when it comes to forecasting their portfolios. Scroll to see our key takeaways when it comes to comparing median IRR by Private Equity, Private Credit and Private Real Assets.
March 2, 2021
Key Takeaways:
- Over almost every vintage year, Private Equity has outperformed Private Credit and Private Real Asset strategies.
- While Private Credit typically underperforms when compared to Private Equity, its lower volatility and stable cash yield can be benefits to investment portfolios.
- Private Real Assets has provided positive returns for 9 of the 10 last vintage years; investing in Real Assets can provide greater diversification for a portfolio due to, for example, its lower correlation with other asset classes.
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Definitions:
- IRR – The Internal rate of return (IRR) is the implied discount rate or effective compounded rate of return that equates the present value of cash flows (distributions + remaining value) with the present value of cash flows (contributions) since inception. The displayed IRR is annualized unless otherwise noted.
- Vintage Year – We define vintage year in one of two ways. (1) The year of the first close, as disclosed in Sec Form D Filings, or (2) the most commonly cited vintage year as disclosed by underlying investors.
- Private Equity – A broad term used to describe any fund that offers equity capital to private companies.
- Private Credit – This strategy focuses on providing debt capital.
- Private Real Assets – Real Assets includes any PM fund with a strategy of Infrastructure, Natural Resources, or Real Estate.
