Kevin Dowd May 03, 2016
In certain circles, 2008 will always be remembered as the year the worldwide economy went through its greatest crisis in nearly eight decades, when global markets tanked and investment activity evaporated. That same year, four blue-chip private equity firms closed mega-funds of $10 billion or more.
Eight years down the line, have those funds born in the most hostile of conditions flourished or wilted?
Here’s a look at the vehicles in question and their relevant metrics as of 4Q 2015:
Altogether, the four funds have posted a median DPI of 0.79x, TVPI of 1.71x, RVPI of 0.7x and IRR of 15.5%, along with an average of about $13 billion distributed.
As you can see, some firms found more success than others, with Apollo Global Management’s seventh flagship fund standing out ahead the pack. Among the vehicle’s notable exits were the sales of Carl’s Jr. parent company CKE Restaurants to Roark Capital Partners and Burton’s Biscuit Company to the Ontario Teachers’ Pension Plan. On the flip side, Bain is the best example of the problems that could befall funds post-crisis, though there's still time yet to lift that 6.9% IRR.
That's true of all the funds, of course, which are still being managed. And their horizons may end up further in the future than first expected. As seen recently with Carlyle's nearly $8 billion Fund IV from 2005, LPs have demonstrated a willingness to grant extra time to crisis-affected vehicles—beyond the traditional 10-year lifecycle—in order to help maximize returns.