Triago Report: NAV Soars for PE Portfolios But Trouble Looms

Triago has come out with its latest quarterly report.

Among the noteworthy finds, the net asset values across all categories of PE funds soared seven percent late last year (from October to December 2010), the report says.

This marks a 40.1% cumulative gain over seven consecutive quarters and puts PE portfolio values nearly on par with the prefinancial crisis peak, Triago says. Net asset values will likely rise for an eighth consecutive quarter. But before you jump for joy, Triago warns that funds from 2005 to 2008 remain far from the hurdle rates that will trigger carried interest for GPs. This means trouble for exit volumes, cash distributions and fundraising in the second half of 2011, Triago says.

Other insights?

  • Buyout purchase price multiples have dropped over the past two quarters. The average multiple for large corporate buyouts is 8.4x EBITDA in Q1 2011, down from a high of 9.1x EBITDA in Q3 2010 (Triago cites S&P LCD info for this). The lower multiples means it will be harder to unload the industry’s record number of unrealized investments, Triago says.
  • Cash distributions to LPs in 2011 will amount to 9% of total capital commitments while cash calls will rise 1/5 to 14% of total capital commitments.
  • Average equity contributions for LBO’s stood at 35.4% in Q1, down from 41.1% in Q4 2010, according to S&P LCD.

The Triago report also features a roundtable with three LPs who talk about how they are re-examining their buyout anchored portfolios. Interestingly, the LPs talk about “mega fund skepticism” and how emerging markets are expected to offer the best returns.

To see the Triago report, go here.