Research

No Country for Old Funds

The secondary market has grown by 83% over the last five years and today represent about 5% of private equity (“PE”) assets. This growth includes the sale of LP portfolios, GP-led transactions and a wide range of structured solutions (such as NAV loans). This growth has been driven by limited partners’ need for liquidity as distributions have slowed to a historic low.

As a follow up to our previous research, this white paper updates our analysis of tail-end private equity portfolios with a focus on US Buyout funds. Utilizing performance data of 1,199 funds over a 20-year period, our work re-enforces many of our past observations but also sheds light on new findings that should motivate LP portfolio managers to take a more active role in how they manage their private equity portfolios, especially underperforming and tail-end funds.

Revenge of the Clawback - $25B+ Problem?

Upwelling has released a research report that provides insight into the current risk of clawback in private markets. The report also details preventive measures and remedies available to LPs and GPs.

From our analysis of 438 fourth quartile funds raised in the US between 2004 and 2016 for which current performance information is available (potential clawback universe (“PCU”), up to $27.8 billion of fund NAV could be at risk of clawback. The PCU is spread across seven private market strategies: buyout, growth, secondaries, real estate, real assets, credit, and distressed.

The Dirtiest Words in Private Equity: NAV Loans

Over the last three years, average annual distributions for buyout funds between five and ten years old have dropped from 39% in 2021 to 13% in Q2 2023, the lowest distribution levels since 20091. Decreased M&A activity, wide bid-ask spreads for secondary transactions, and increased financing cost for portfolio companies are the key reasons. Not surprisingly, private capital fundraising is down 14% year-over-year as of Q3 2023. The confluence of these factors has led to a significant increase in fund level financings.

Are All CVs Created Equal?

In the ever-evolving landscape of private equity, Continuation Vehicles have emerged as a critical tool for General Partners and Limited Partners. GPs use CVs to create liquidity for their investors and provide LPs an option to extend their investment in assets expected to generate attractive risk-adjusted returns. LPs have increasingly used CVs to lock in strong realized IRRs, improve DPI and rebalance their portfolios (either as sellers or as buyers, to adjust exposure to sectors, geographies, strategies, or core managers).

Are LPs Missing the Boat? Examining GP-Led secondaries in the private equity market

Upwelling has released a research report on the proliferation and impact of GP-led secondaries in the private equity industry and within institutional portfolios. The report highlights the performance of Continuation Vehicles (“CVs”) over recent years and presents an analysis on the potential returns that LPs may miss by selling and not rolling into the new vehicles. The report addresses the decision that LPs face and provides the following results and recommendations…

Tail End Report - 2021 Research: Re-examining PE Fund Performance & Secondary Market Analysis

Upwelling has released an updated research report re-examining private equity performance of “Tail-End Funds” (funds operating beyond 10 years). Some of the key highlights and affirmations of the previous study include the following…

2019 Research on Tail-End Funds

Upwelling released an in-depth research report which examines the performance of private equity funds operating beyond 10 years (“Tail-End Funds”). The report details key findings, such as…