December 2014

U.S. Private Equity and Venture Capital Funds Outpaced Public Market Equities over the First Half of 2014

Limited Partner Distributions Surpassed Contributions for a Record 10th Straight Quarter

BOSTON, MA (Dec. 11, 2014) – US private equity and venture capital funds generated positive returns for their investors in the second quarter of 2014, with the former asset class outperforming the latter by a margin of almost two to one. Private equity also surpassed venture capital over the six-month period ending June 30, and both surpassed the performance of public equities at the half-year mark, according to Cambridge Associates.

The Cambridge Associates LLC U.S. Private Equity Index® rose 5.7% in Q2, versus an increase of 3.0% for the Cambridge Associates LLC U.S. Venture Capital Index®. The PE benchmark was up 8.9% at mid-year while the VC benchmark gained 8.1% over the same period. For comparison, the S&P 500 was up 5.2% and 7.1%, for the second quarter and half year period, respectively.

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

Periods ending June 30, 2014

For the periods ending June 30, 2014 Qtr. YTD 1Year 3Years 5Years 10Years 15Years 20Years 25Years
USPE 5.7 8.9 22.4 14.5 17.7 14.3 11.9 14.0 13.8
USVC 3.0 8.1 29.2 13.8 14.8 10.3 13.1 34.0 21.4
NASDAQ Composite* 5.0 5.5 29.5 16.7 19.2 8.0 3.4 9.6 9.7
Russell 2000 Composite 2.0 3.2 23.6 14.6 20.2 8.7 8.0 9.8 9.7
S&P 500 5.2 7.1 24.6 16.6 18.8 7.8 4.3 9.8


Sources: Cambridge Associates LLC, Frank Russell Company, Standard and Poor’s, and Thomson Datastream. * Capital Changes Only

As can be seen in the table above, both benchmarks had mixed results against public equities over some of the shorter time horizons (up to five years) but the private indexes have easily exceeded public markets for periods shown of 10 years and longer.

Private Equity (PE) Performance

Energy’s Q2 Return of almost 10% led the Way among Largest Sectors

Seven sectors in the private equity benchmark represented 5% or more of the index and all had positive returns for the second quarter. Energy, the second largest sector in the index by weight, was the top earner, generating a 9.4% return for the quarter. The sector’s performance was boosted by energy company write-ups of more than $1.0 billion in five different vintages. However, given the dramatic decline in oil prices since June 2014, we expect downside volatility here.

Software and health care each rose 7.5% for the period. Consumer companies posted the lowest return of the seven large sectors, 3.7%.

Distributions, though down for the Quarter, Again Outpaced Contributions

Q2 saw an increase over the prior quarter in capital calls from fund managers. Calls were up 27.6% over Q1 to $22.0 billion. Distributions equaled $39.7 billion, a 5.6% quarter over quarter increase, continuing to outpace contributions.

“We have had 2.5 years of strong distribution activity, with LPs receiving approximately $2 back for every $1 called: It’s been great. However, a component of that is really just payback for past investment. Over the longer term, i.e., the last ten years which encompasses the fundraising boom, the financial crisis and the recovery, fund managers have only distributed $1.10 for every dollar that they called,” said Keirsten Lawton, Managing Director and Co-Head of US Private Equity Research at Cambridge Associates.

The Five Largest Vintages in the PE Benchmark all had Positive Returns in Q2

Only five vintage years in the PE benchmark represented at least 5% of the index’s value, and all five posted positive returns for the period. Funds raised in 2011, the smallest vintage year by weight of the top five, rose 7.5%, the most of any vintage. The 2006 vintage year funds gained 5.2%, the lowest return of the group. The largest vintage year in the index, the funds raised in 2007, earned a 6.2% return for the period.

Taken together, the five largest vintages represented 76% of the PE index’s value.

Venture Capital (VC) Performance

Only Three Sectors were Significantly Sized in the VC Benchmark, but they All Made Gains in Q2

Unlike the PE index, the venture capital benchmark was tightly concentrated by sector, with the health care, IT, and software sectors continuing to dominate the index. These three accounted for 78.4% of the benchmark’s value in Q2. Of these sectors, software was the smallest by weight, but it turned in the best performance, gaining 8.5%, helped by widespread write-ups in software companies across the index.

Health care rose 4.2% for the period while the largest sector in the VC index, information technology, which accounted for almost one-third of the benchmark’s value, had the smallest gain: 3.2%.

Distributions in the VC Index Surpassed Contributions for 10th Straight Quarter

Paralleling the actions of their private equity counterparts, fund managers in the venture capital index reduced distributions in Q2, but they still distributed far more capital to their LPs than they called.

“Fund managers in the VC index called $3.8 billion from their LPs in Q2, which was a 4.2% increase over the previous quarter. They distributed $6.7 billion to their LPs, which though 4.4% less than what we saw in Q1, still made the second period the 10th consecutive quarter in which distributions outnumbered contributions. To put the drop in second quarter distributions in perspective, it’s important to remember that they followed the near record-setting level of distributions in Q1, which were the highest quarterly distributions since the final quarter of 2000,” said Theresa Hajer, Managing Director, Private Growth Research at Cambridge Associates.

VC Index had a Particularly Wide Range of Returns among the 9 Largest Vintages

A total of nine vintage years in the VC benchmark represented at least 5% of the index’s value. All but two, 2000 and 2004, had positive returns for the second quarter. Returns for the group ranged from a gain of 20.0% for the 2011 vintage year funds to a loss of 2.2% for the 2004 vintage. Write-ups in the software sector were the primary drivers of the 2011 vintages huge return, which was a full 11% greater than the next best-earning sector, the 2012 funds’ 9.0% return.

The two largest vintages in the benchmark, the 2008 and 2006 funds, gained 3.6% and 2.9% for the period, respectively.

For additional details on the performance of the Cambridge Associates private equity and venture capital benchmarks go to

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 nearly 1,000 global investors and delivers a range of services, including investment consulting, outsourced investment solutions, research and tools (Research Navigatorsm and Benchmark Calculator), and performance monitoring, across asset classes. The firm compiles the performance results for more than 5,600 private partnerships and their nearly 70,000 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 1,100 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 African Private Equity and Venture Capital Association (AVCA); the Asia Pacific Real Estate Association (APREA); 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,