July 2016

Private Equity and Venture Capital Outperformed Public Markets in 2015, but Returned Less than Previous Two Years

For Second Year in a Row, Energy Companies Dampened PE Index Returns; Best-Performing Sectors in Both PE and VC Were Healthcare, Software and IT

Boston (July 18, 2016) – US private equity and venture capital funds posted higher returns for 2015 than the public markets, though they underperformed in the final quarter of the year, according to investment advisor Cambridge Associates. US PE and VC funds continued a two-year downward trend, returning less to investors in 2015 than they had in 2013 or 2014. Energy companies dampened returns for PE funds, as they did last year.

The Cambridge Associates LLC US Private Equity Index® rose 0.5% and 5.9% for the quarter and year ending December 31, 2015. The Cambridge Associates LLC US Venture Capital Index® increased 1.6% and 12.9%, respectively, over the same periods. For comparison, for the fourth quarter and annual returns for the S&P 500 in 2015 were 7.0% and 1.4%. While energy companies held down returns for the PE Index, as they did in 2014, the annual returns of both Cambridge benchmarks were helped by the strong performances of companies in three large sectors: healthcare, software and IT.

Cambridge Associates derives its US PE and VC Indexes from the financial information contained in its proprietary database of 1,251 US PE and 1,619 US VC funds, with a combined value of roughly $781 billion.

US Private Equity and Venture Capital Index Returns
Periods Ended Dec. 31, 2015 • US$ Terms • Percent (%)

Sources: Cambridge Associates LLC, Dow Jones & Company, Inc., Frank Russell Company, Standard & Poor’s, and Thomson Reuters Datastream.
Notes: Private indexes are pooled horizon internal rates of return, net of fees, expenses and carried interest. Public indexes are average annual compound returns (time-weighted returns). Because the US Private Equity and Venture Capital indexes are capital weighted, the largest vintage years mainly drive the indexes’ performance.
* Capital changes only.

Private Equity Performance InsightsStrongest Returns from Vintage 2009 Funds; Healthcare and Energy Best- and Worst-Performing Sectors; Contributions and Distributions Down from 2014 But Still High

“Despite a somewhat muted environment for initial public offerings and merger & acquisition activity, and the fallout from energy companies’ weak performance, PE funds still bested public markets over the course of 2015. The year also marked the fourth consecutive year in which over $100 billion was returned to investors in the benchmark,” said Keirsten Lawton, co-head of US Private Equity Research, Cambridge Associates.

The PE Index returned far less (5.9%) in 2015 than in the previous two years, when the index earned double-digit returns.

Seven vintage years – 2005-09, 2011 and 2012 – represented 81% of the Cambridge PE Index in the fourth quarter, and returns for all but one of these vintages were flat or modestly positive. Returns among these key vintages ranged from -1.6% for the 2008 funds to 3.6% for the 2009 funds. For the quarter and year’s best-performing vintage, 2009, gains in healthcare and consumer companies surpassed losses in financial services.

All but two of the meaningfully sized sectors – i.e., those representing at least 5% of the PE Index – produced positive returns in 4Q 2015. The quarter’s negative sectors were energy and financial services; IT posted the highest return for the quarter. For the second year in a row, healthcare and energy were the best- and worst-performing sectors in the PE Index, earning 29.2% and -20.1%, respectively. Other than healthcare, three sectors posted double-digit returns: software, IT and consumer.

Distributions and contributions fell from 2014 levels, which were record-breaking. In the fourth quarter, managers called $23.7 billion from PE limited partners and returned $36.7 billion, representing increases from the third quarter 2015. During all of 2015, managers in the PE Index called $78.3 billion from and returned $140.6 billion to investors, declines of $9.0 billion and $17.8 billion, respectively. Both periods saw GPs return approximately $1.80 for every $1.00 contributed back to investors, a pacing that continues to reflect significant net capital back to limited partners.

Venture Capital Performance InsightsHealthcare Posted Highest Fourth Quarter and Annual Returns; Vintage 2011 and 2012 Tied for Best Performance, 25.7% Return; Distributions to Investors in 2015 Third-Highest of All Time

“The VC Index’s performance last year (12.9%) significantly outpaced the S&P 500 and Russell 2000 indexes (1.4% and -4.4%, respectively). Venture capital remains a strong long-term return driver for institutional investors, having outperformed public markets over the last five, 10 and 20 years. 2015 was the fourth consecutive year when distributions to investors were higher than contributions to managers, meaning investors who have mature venture programs have been rewarded, whereas investors with younger portfolios were less likely to reap these cash flows and more likely to show ‘paper gains’ over this period,” said Theresa Sorrentino Hajer, Managing Director, Private Growth Research, Cambridge Associates.

In 2015, six of the VC Index’s eight meaningfully sized vintage years posted double-digit returns, and vintages 2011 and 2012 tied for the year’s best performance: 25.7%. Vintage years 2010 and 2012, which together accounted for 22% of the index, were the largest positive contributors to the VC index’s performance in 2015.

The three largest sectors – IT, healthcare and software – accounted for almost 82% of the index’s value. About 86% of VC Index capital invested in the fourth quarter went to companies in these sectors. Healthcare was the sector with the highest quarter and annual returns – 6.1% and 25.6%, respectively. The other two highest-performing sectors during 2015 were software (13.7%) and IT (11.2%).

In the fourth quarter 2015, managers in the US VC Index called $3.3 billion from investors – a drop of 15.1% from the third quarter. Fourth quarter distributions totaled $7.1 billion, 43.1% higher than the previous quarter. US VC Index managers called $15.3 billion over the course of 2015, a drop of 7.5%. VC Index distributions fell 12.3% to $28.0 billion. Nevertheless, 2015 saw the third-highest annual distribution level of all time, behind only 2014 ($32 billion) and the bubble year of 2000 ($57 billion).

For additional details on the performance of the Cambridge Associates private equity and venture capital benchmarks in the second quarter please click here.

About the Indexes
Cambridge Associates derives its U.S. private equity benchmark from the financial information contained in its proprietary database of private equity funds. As of December 31, 2015, the database comprised of 1,251 U.S. buyouts, private equity energy, growth equity, and mezzanine funds formed from 1986 to 2015, with a value of $587.2 billion. Ten years ago, as of December 31, 2005, the index included 663 funds whose value was $208 billion.

Cambridge Associates derives its U.S. venture capital benchmark from the financial information contained in its proprietary database of venture capital funds. As of December 31, 2015, the database comprised 1,619 U.S. venture capital funds formed from 1981 to 2015, with a value of $193.5 billion. Ten years ago, as of December 31, 2005, the index included 1,101 funds whose value was $61.1 billion.

About Cambridge Associates
Founded in 1973, Cambridge Associates is a provider of independent investment advice and research to institutional investors and private clients worldwide. Working alongside its early clients, among them several leading universities, it pioneered the strategy of high equity orientation and broad diversification, which since the 1980s has been a primary driver of performance for these leading fiduciary investors. Cambridge Associates serves over 1,000 global investors and delivers a range of services, including investment advisory, outsourced investment solutions, research and tools, and performance monitoring, across global asset classes. Cambridge Associates has more than 1,200 employees – including over 150 research staff – serving its client base globally and maintains offices in Arlington, VA; Boston; Dallas; Menlo Park and San Francisco, CA; London; Singapore; Sydney; and Beijing. Cambridge Associates consists of five global investment consulting affiliates that are all under common ownership and control. For more information about Cambridge Associates, please visit

Cambridge Associates has been selected to provide data and to develop and maintain customized industry benchmarks for a number of prominent industry associations, including the African Private Equity and Venture Capital Association (AVCA); Australian Private Equity & Venture Capital Association Limited (AVCAL); Canada’s Venture Capital and Private Equity Association (CVCA); the Hong Kong Venture Capital and Private Equity Association (HKVCA); the Indian Private Equity and Venture Capital Association (IVCA); Institutional Limited Partners Association (ILPA); the Latin American Private Equity and Venture Capital Association (LAVCA); the National Venture Capital Association (NVCA); and the New Zealand Private Equity & Venture Capital Association Inc. (NZVCA). Cambridge Associates also provides data and analysis to the Emerging Markets Private Equity Association (EMPEA).

Both the Cambridge Associates LLC U.S. Private Equity Index® and the Cambridge Associates LLC U.S. Venture Capital Index® are reported each week in Barron’s Market Laboratory section. In addition, complete historical data can be found on Standard & Poor’s Micropal products and on our website,

This release is provided for informational purposes only and is not intended to be investment advice. Any references to specific investments are for illustrative purposes only. The information herein does not constitute a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual clients. This release is not an offer to sell or the solicitation of an offer to buy any security in any jurisdiction. Past performance is not a guarantee of future returns. With regard to any references to securities indices, such indices are unmanaged and are not subject to fees and expenses typically associated with managed accounts or investment funds. Investments cannot be made directly in an index.

Inquiries about these indices should be addressed to: Eric Mosher at Sommerfield Communications, 55 Broad Street, 20th Floor, New York, NY 10004; 212.255.8386; (fax) 212.255.8459;