n this conference, we will bring together leading private equity and venture capital fund managers and allocators to learn how they pick winners, add value and deliver returns. Our speakers will discuss their experiences investing in private companies and funds, how they manage their portfolios, fundraising and their expectations for the future. Private equity and venture capital returns have often outperformed public market indices, though public markets have outperformed more recently, according to Cambridge Associates. Over the past five years, US private equity generated 13.6% IRR and US venture capital generated 14.1% IRR, slightly less than the 14.6% average annual compounded return for the S&P 500. Over the past 25 years, US private equity generated 13.5% IRR and US venture capital generated 27.3% IRR, far outpacing the 9.6% average annual compounded return for the S&P 500. Manager selection is crucial as private investment returns vary widely. According to Cambridge Associates research, a top-quartile private equity manager is expected to outperform a median private equity manager by 6.4% per year over ten years, a 4-5X greater difference than for public equity managers. Private Equity Private equity (PE) dealmakers put $538 billion to work across more than 4,000 deals in 2017. The median acquisition multiple of 10.5X EV/EBITDA remained unchanged from 2016: however, PE dealmakers used higher levels of leverage in 2017, with the median debt/EBITDA multiple climbing to 5.7X, the highest level recorded by Pitchbook. Private equity firms realized $185 billion in nearly 1100 exits during 2017, an 11% YOY decline. The downward trend in PE exits is largely driven by a strong pullback in strategic activity. Private equity dry powder has continued to build as a result of the record fundraising environment over the last few years. PE firms closed on $233 billion across 247 funds during 2017, and a record $648 billion has been raised over the past three years. Capital continues to accrue to fewer yet larger PE funds, and the median time between funds has fallen to less than 3 years. Venture Capital The venture capital (VC) industry has evolved as VC-backed companies stay private longer and command larger deal sizes. With more capital being deployed at higher valuations, our venture capitalist speakers will address a key question: can outperformance be sustained? Record unicorn financings drove 2017 total venture capital investments to $84 billion, the largest amount since the early 2000s, according to Pitchbook and the National Venture Capital Association. Unicorns – with valuations of $1 billion or more – raised $19 billion in 2017, representing nearly one-quarter of total VC dollars invested though less than 1% of deal volume. Venture capital investments outpaced exits again in 2017. While $84 billion was invested across more than 8,000 venture-backed companies, the number of VC exits continued to decline to 769 liquidity events though total VC exit value remained relatively flat at $51 billion in 2017. The median time to exit in the venture market has reached a record 5.6 years. Private equity investors have also provided liquidity to VC investors, with a record-setting 146 private equity buyouts of venture-backed companies in 2017. Venture capital funds have raised $142 billion in committed capital over the past four years. Sources: Cambridge Associates, National Venture Capital Association, Pitchbook.
Learning Outcome Statements
- How private equity and venture capital (PE & VC) fund managers make investment decisions and choose which companies to back
- How PE & VC fund managers help create value in their portfolio companies
- How institutional LPs make allocation decisions and select PE & VC fund managers
- How PE & VC fund managers develop syndicates and collaborate with other investors
- How PE & VC fund managers and allocators source their investments