February 2013

U.S. Private Equity and Venture Capital Funds Generated Positive Returns in Q3 2012, Though Both Trailed Public Equities for the Period, According to Cambridge Associates

BOSTON (Feb. 5, 2013) – Private equity funds in the U.S. returned to positive territory in the quarter ending September 30, 2012, following a slightly negative second quarter.  U.S. venture capital funds, while significantly underperforming private equity, also turned in a positive performance for the third quarter.  Performance of both classes of alternative assets lagged public market returns, which rebounded from a poor second quarter to generate robust third quarter results, according to a new commentary from Cambridge Associates LLC.

The Cambridge Associates LLC U.S. Private Equity Index® returned 3.6% for the third quarter, a 3.7% increase over the prior period.  The index stood at 9.2% year-to-date and was up more than 15% over the preceding 12 months.  The Cambridge Associates LLC U.S. Venture Capital Index® earned 0.6% in the third quarter, mirroring its result in the second quarter.  The venture index’s year-to-date and one-year returns were 6.1% and 7.7%, respectively.  The following table compares the performance of the private equity and venture capital benchmarks with that of some important public market indices.

U.S. Private Equity and Venture Capital Index Returns (%) for Periods ending

September 30, 2012


For the periods ending

September 30, 2012


Year to


1 Year

3 Years

5 Years





























Other Indices











NASDAQ Composite*










Russell 2000 Composite










S&P 500











Sources: Cambridge Associates LLC, Dow Jones & Company, Inc., Frank Russell Company, Standard and Poor’s, and Thomson Reuters Datastream.

* Capital Changes Only

The private equity index outperformed indices tracking large and small public companies in all six of the time horizons longer than one year listed in the table above, from the three-year to the 25-year mark.  The venture capital index trailed the public markets in five of the nine periods in the table.  Over the longer time horizons, the VC index, like the PE index, significantly outperformed the public markets.

At the end of the third quarter, public companies comprised 21.0% of the value of the PE index and 14.7% of the VC index.  Both figures were down from the prior quarter.

The Largest Vintage Year in the PE Index Was Also the Best Performer Among the TopSized Vintages

Only five vintages in the PE index represented at least 5% of the benchmark’s value.  All five had positive returns for the quarter.   Funds launched in 2007 comprised the largest group in the index, representing more than one-fourth (25.8%) of its value, and had the highest return of the top five for the third quarter: 4.5%.  Most of the gains in the 2007 funds were due to increased valuations for energy companies, though write-ups in healthcare and manufacturing also contributed.

The second largest group of funds in the PE index was the 2006 vintage, which represented 23.4% of the index’s value and earned 3.8% for the period.

Capital Distributions in the PE Index Outpaced Contributions for the Sixth Time Out of the Past Eight Quarters

Fund managers in the private equity index called $16.7 billion from investors in the third quarter, an increase of almost one-third over the previous quarter.  They distributed $21.6 billion, a drop of almost $8 billion from the prior period, when distributions were at their highest level since the middle of 2007.

Over the last two years, private equity fund managers have distributed 1.3 times as much capital as the called, and in six of those quarters, distributions were higher than contributions.

Largest Sectors in the PE Index All Had Positive Third-Quarter Returns

The performance of all eight of the significantly sized sectors in the PE index was solid during the third quarter, with each sector generating a positive return.  Manufacturing companies in the index turned in the strongest performance of the group, earning 5.2%.  Healthcare was second, generating a 5.0% return.

Energy Companies Continued to Benefit from Investment Dollars

“For the fourth quarter in a row, energy companies, which represented the second largest sector in the PE index by weight, received the greatest amount of investment capital, though consumer companies were not far behind.  Together, the two sectors attracted about 38% of all invested capital for the third quarter, which was a slight increase over the long-term average,” said Keirsten Lawton, Senior Consultant, Private Equity Research at Cambridge Associates.

Returns in the Venture Capital Index Were Mixed

Seven vintages of funds in the venture capital index represented at least 5% of the benchmark’s value in the third quarter.  Of these vintages, four had positive returns for the quarter; the three with negative returns included the 2006 vintage, the largest in the index, which dropped 1.0% for the period.  The best performing of the largest vintages were funds launched in 2000, which earned 2.5% for the quarter, due primarily to gains for software companies.  The earnings for the 2006 funds were dragged down by lost value in information technology (IT) companies.

Distributions in Venture Capital Index Hit Highest Mark in More Than A Decade

Venture capital fund managers called $3.2 billion in the third quarter from their limited partners, a 17.4% decrease from the prior quarter.  Managers distributed $5.9 billion, a 5.5% quarter-to-quarter increase and the highest level of quarterly distributions for the VC benchmark since the first quarter of 2001.  As in the PE index, this marked the sixth time in the last eight quarters in which distributions outstripped contributions.  Together, distributions from the 2000 and 2004 vintage year funds represented one-third of the total distributions for the quarter.

Venture Capital Index Remains Highly Concentrated by Sector

“While the venture capital benchmark has become more diversified by vintage year, it remains tightly concentrated by sector.  Only four sectors – healthcare, IT, media, and software – represented more than 5% of the index’s value, and the three largest – IT, healthcare, and software – comprised almost three-fourths of the index’s total value.   For the second consecutive quarter, three of the four largest sectors had positive returns, with software leading the way earning 5.8% for the period.  The only loser was IT, which dropped 2.7%,” said Theresa Sorrentino Hajer, Managing Director and Venture Capital Research Consultant at Cambridge Associates.

Healthcare Companies Received the Most Capital in VC Index

Roughly three-fourths of the capital invested in the VC index in the third quarter went to companies in healthcare, IT, and software.  Healthcare received the most of any sector, more than 32% of the total investments during the period.

About Cambridge Associates and the Indices

Founded in 1973, Cambridge Associates is a provider of independent investment advice and research to institutional investors and private clients worldwide. Today the firm serves over 900 global investors and delivers a range of services, including investment consulting, outsourced portfolio solutions, research services and tools (Research Navigatorsm and Benchmark Calculator), and performance monitoring, across all asset classes. The firm compiles the performance results for over 5,000 private partnerships and their more than 65,000 portfolio company investments to publish its proprietary private investments benchmarks, of which the Cambridge Associates LLC U.S. Venture Capital Index® and Cambridge Associates LLC U.S. Private Equity Index® are widely considered to be among the standard benchmark statistics for these asset classes.  Cambridge Associates has more than 1,000 employees serving its client base globally and maintains offices in Arlington, VA; Boston; Dallas; Menlo Park, 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 Institutional Limited Partners Association (ILPA), Australian Private Equity & Venture Capital Association Limited (AVCAL); the African Venture Capital Association (AVCA); the Hong Kong Venture Capital and Private Equity Association (HKVCA); the Indian Private Equity and Venture Capital Association (IVCA); the New Zealand Private Equity & Venture Capital Association Inc. (NZVCA); the Asia Pacific Real Estate Association (APREA); and the National Venture Capital Association (NVCA). Cambridge also provides data and analysis to the Emerging Markets Private Equity Association (EMPEA). The pooled returns represent the net end-to-end rates of return calculated on the aggregate of all cash flows and market values as reported to Cambridge Associates by the funds’ general partners in their quarterly and annual audited financial reports.  These returns are net of management fees, expenses, and performance fees that take the form of a carried interest.

Both the Cambridge Associates LLC U.S. Venture Capital Index® and the Cambridge Associates LLC U.S. Private Equity 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,

Media Contact:

Frank Lentini
Sommerfield Communications, Inc.