ALJA Welcomes Sharply Improved Results on Private Equity and Venture Capital Funds

Private equity outperformed venture capital during the same period, while both lagged public market returns -- the latter a reversal from the fourth quarter of 2010, when both alternative asset classes produced better returns than the major public market indices. End Quote

(1888PressRelease) May 11, 2011 - Strong public market performance and a gradually improving economy helped improve the results generated by private equity and venture capital funds in the quarter ending March 31, 2011. Each alternative asset class earned its sixth consecutive quarter of positive returns and significantly outperformed its respective prior-quarter results, breaking a short streak of declining positive returns in each category (four consecutive quarters for private equity and two for venture capital).

Private equity outperformed venture capital during the same period, while both lagged public market returns -- the latter a reversal from the fourth quarter of 2010, when both alternative asset classes produced better returns than the major public market indices. Private equity and venture capital funds continued to outperform the public markets over the long term.

Private equity funds earned a 5.1% return for the first quarter of 2011, up from 1.6% in the prior quarter. Venture capital returned 3.7% versus 0.4% for the same periods. Both fund classes benefited from a resurgence in mergers and acquisitions (M&A) and initial public offerings (IPOs).

The private equity and venture capital indices handily outperformed their public-market counterparts over the 15- and 20-year periods ending March 31, 2011.

With the exception of the present quarter, the private equity benchmark outperformed U.S. public markets in all of the time periods. The venture capital index's results were mixed, except over the long term, where, as noted, they eclipsed public market results. The spread between the private equity and venture capital ten-year returns continued to widen in the first quarter, moving to 12.7% from 11.5% as of the fourth quarter.

Fund managers in the U.S. private equity index called and distributed more capital in the first quarter than they did in the second. Limited partners (LPs) contributed just over $20 billion for the quarter, a 5.2% increase, and received distributions of nearly $16.7 billion, a 28% increase over the previous quarter and the highest level of capital distributions in three years. Investors in funds launched in 2000, 2004, and 2006 collectively received roughly $9.1 billion or 54% of the capital distributed during the period.

By the end of the first quarter, fund managers had already distributed to their LPs almost three times as much capital as they did in all of 2009.

For the first quarter, contributions again outnumbered distributions, as they have for more than three years running. The exit environment continue to improve, with realizations actually increasing faster than investments. In addition, credit availability during the first quarter continued on a path towards pre-recession levels.

During the first quarter, all eight meaningfully-sized sectors in the U.S. private equity index earned positive returns. Of these, the three largest by asset value -- consumer, healthcare, and energy -- comprised just over half of the index's total value. Of the eight key sectors, IT performed best, returning 9.0% for the quarter, versus a close-second energy sector, which earned 8.7%. Software had the lowest return of the key sectors, 4.4%, but also represented the smallest weight (just 5.8%) in the PE index among the top eight.

Venture capital performance and most industry fundamentals improved in the first quarter of 2011, with valuations for venture-backed companies rising for the fifth quarter in a row. Although there was a smaller number of IPO-exits during the period, average offering prices were higher than during the previous quarter. In addition, the number of mergers and acquisitions, the number of deals with disclosed values, and the announced deal values themselves all increased as compared to the prior quarter.

The largest four vintage years by size -- 2000, 2006, 2005, and 2004 -- remained constant and accounted for 56.5% of the U.S. venture capital index's value. However, the percentage represented by the largest vintage, 2000, was 19.6%, down from nearly 24% one year earlier.

The venture funds raised in 1999 were the top performers of the nine vintage years that represented at least 5% of the index's value, returning 7.5%. Increased valuations for IT and higher values plus realizations from healthcare drove 1999's results. Of the nine largest vintages, 2001 and 2006 were the worst performers for the quarter, each returning just 1.4%.

Similar to the private equity benchmark, all of the meaningfully-sized sectors in the U.S. venture capital index produced positive returns for the quarter. The index continued to be highly concentrated by sector, with the top three -- healthcare, IT, and software -- comprising nearly 75% of its value. Software was the best performing of the top three sectors for the quarter, generating a 7.7% return. IT, which had been the top performing sector in the entire venture capital index for the previous three quarters, still came in second among the meaningfully-sized sectors, earning 7.3% for the quarter.

:About ALJA (Anderson, Lloyd, Jones & Associates):
Anderson, Lloyd, Jones & Associates (ALJA) is a venture capital and management consulting firm. We invest in and provide management consulting services (including investor relations services) to early stage emerging growth companies and to microcap and smallcap public companies. We aim to form a close partnership with a company, developing relationships with management, investors and shareholders. We inform the investment community about a company, provide a management consulting to grow the business, and often take an equity stake in companies we assist.

:Press Info:
Kyo Machida
International Relations Manager
kyo ( @ ) alja dot com

###

space

Other Related Press Releases