AMERICAN INVESTMENT COUNCIL Performance Update 07 Q4
Private Equity Performance Benchmarks (as of December 3, 07) Private Equity Benchmark Returns (Horizon IRR) -Year 3-Year 5-Year 0-Year BISON Private Equity Benchmark 7.9%.8% 4.7% 0.4% Cambridge Associates U.S. Private Equity Index (excluding venture capital) 7.5%.8% 3.9% 9.8% Cambridge Associates U.S. Buyout Fund Index 8.9% 3.4% 5.9% 0.% Cambridge Associates U.S. Growth Equity Index.9% 4.0% 5.8%.3% CepreX North America PE Index (excluding venture capital).% 3.3% 3.5%.3% ILPA U.S. Private Equity Index (excluding venture capital) 7.5%.7% 3.8% 9.8% Preqin North America Private Equity Horizon IRRs.7% 5.6% 7.8% 7.7% State Street U.S. Private Equity Index (buyout + private debt, ex. VC) 5.9%.7% 3.6% 9.8% State Street U.S Buyout Index 5.8%.5% 4.3% 9.8% Public Market Returns -Year 3-Year 5-Year 0-Year Russell 3000 Index (including dividends).%.% 5.6% 8.6% S&P 500 Index (excluding dividends) 9.4% 9.% 3.4% 6.% S&P 500 Index (including dividends).8%.4% 5.8% 8.5% Analysis -Year 3-Year 5-Year 0-Year Median Private Equity Benchmark Return (excluding venture capital) 7.5%.8% 3.9% 9.8% Private Equity Benchmark Outperformance (excluding venture capital) 3-4.3% 0.4% -.9%.3% Performance figures are based on most recent publicly available information. Performance figures of Preqin are preliminary Horizon IRRs. Calculated by taking the median of BISON Private Equity Benchmark, Cambridge Associates U.S. Private Equity Index (excluding venture capital), CepreX North America PE Index (excluding venture capital), ILPA U.S. Private Equity Index (excluding venture capital), Preqin Private Equity Horizon IRRs and State Street U.S. Private Equity Index (buyout + private debt, ex. VC). 3 Calculated by subtracting the S&P 500 Index (including dividends) return from the median private equity benchmark return. Returns are reported net of fees, unless otherwise stated. Returns exceeding one year are annualized. Public market returns are time-weighted. PAGE
Private Equity Performance Benchmarks (as of September 30, 07) Private Equity Benchmark Returns (Horizon IRR) -Year 3-Year 5-Year 0-Year BISON Private Equity Benchmark 3.0% 9.8% 3.9% 9.9% Cambridge Associates U.S. Private Equity Index (excluding venture capital) 6.9% 0.% 3.7% 9.7% Cambridge Associates U.S. Buyout Fund Index 7.4%.9% 5.7% 0.0% Cambridge Associates U.S. Growth Equity Index 8.0%.4% 5.%.% CepreX North America PE Index (excluding venture capital) 3.9% 4.6% 4.6% 3.7% ILPA U.S. Private Equity Index (excluding venture capital) 6.8% 0.% 3.6% 9.6% Preqin Private Equity Horizon IRRs 8.3% 3.8% 3.8% 5.5% State Street U.S. Private Equity Index (buyout + private debt, ex. VC) 5.4% 0.% 3.5% 9.7% State Street U.S Buyout Index 5.8% 0.7% 4.% 9.7% Public Market Returns -Year 3-Year 5-Year 0-Year Russell 3000 Index (including dividends) 8.7% 0.7% 4.% 7.6% S&P 500 Index (excluding dividends) 6.% 8.5%.8% 5.% S&P 500 Index (including dividends) 8.6% 0.8% 4.% 7.4% Analysis -Year 3-Year 5-Year 0-Year Median Private Equity Benchmark Return (excluding venture capital) 3 6.% 0.% 3.7% 9.7% Private Equity Benchmark Outperformance (excluding venture capital) 4 -.5% -0.7% -0.5%.% Performance figures are based on most recent publicly available information. September 30, 07 performance figures from PitchBook and Preqin were not yet available at the time of analysis (February, 08). Performance figures of Preqin are preliminary Horizon IRRs. 3 Calculated by taking the median of BISON Private Equity Benchmark, Cambridge Associates U.S. Private Equity Index (excluding venture capital), CepreX North America PE Index (excluding venture capital), ILPA U.S. Private Equity Index (excluding venture capital), Preqin Private Equity Horizon IRRs and State Street U.S. Private Equity Index (buyout + private debt, ex. VC). 4 Calculated by subtracting the S&P 500 Index (including dividends) return from the median private equity benchmark return. Returns are reported net of fees, unless otherwise stated. Returns exceeding one year are annualized. Public market returns are time-weighted. PAGE 3
Private Equity Performance Public Pensions (as of December 3, 07) Return Private Equity Benchmark Pension Fund Private Equity Investments Russell 3000 Index Total Return S&P 500 Index Total Return 5% 0% 5% 0% 5% 7.5% 8.7%.%.8%.8%.4%.%.4% 3.8% 4.5% 5.6% 5.8% 9.8% 8.9% 8.6% 8.5% 0% -Year 3-Year 5-Year 0-Year. Median of BISON Private Equity Benchmark, Cambridge Associates U.S. Private Equity Index (excluding venture capital), CepreX North America PE Index (excluding venture capital), ILPA U.S. Private Equity Index (excluding venture capital), Preqin Private Equity Horizon IRRs and State Street U.S. Private Equity Index (buyout + private debt, ex. VC).. Median return of pension fund private equity investments included in this report. Performance figures of private equity benchmarks are reported as IRRs, while those of pension fund private equity investments are reported as time-weighted returns. Pension fund private equity investment returns reflect the performance of the asset class itself, as well as the fund manager s ability to identify profitable investment opportunities. The private equity asset class may be defined differently depending on the pension fund. PAGE 4
Private Equity Performance Public Pensions (as of September 30, 07) Return Private Equity Benchmark Pension Fund Private Equity Investments Russell 3000 Index Total Return S&P 500 Index Total Return 0% 5% 6.% 8.5% 8.7% 8.6% 3.7% 4.% 4.% 4.% 0% 5% 0.%.3% 0.7% 0.8% 9.7% 8.6% 7.6% 7.4% 0% -Year 3-Year 5-Year 0-Year. Median of BISON Private Equity Benchmark, Cambridge Associates U.S. Private Equity Index (excluding venture capital), CepreX North America PE Index (excluding venture capital), ILPA U.S. Private Equity Index (excluding venture capital), Preqin Private Equity Horizon IRRs and State Street U.S. Private Equity Index (buyout + private debt, ex. VC). See slide 3 for details. September 30, 07 performance figures from PitchBook were not yet available at the time of analysis (February, 08).. Median return of pension fund private equity investments included in this report. See slides 4-5 for details. Performance figures of private equity benchmarks are reported as IRRs, while those of pension fund private equity investments are reported as time-weighted returns. Pension fund private equity investment returns reflect the performance of the asset class itself, as well as the fund manager s ability to identify profitable investment opportunities. The private equity asset class may be defined differently depending on the pension fund. PAGE 5
Private Equity Benchmarks BISON Private Equity Benchmark Bison's North American Buyout & Growth Equity pooled return indices draw from a transparent dataset of close to,000 funds with since inception cash flows. The indices cover buyout, growth equity, and infrastructure funds formed between 99 and 07. Cambridge Associates U.S. Private Equity Indices The US Private Equity Index is compiled using data from,455 US private equity funds formed between 986 and 07. The firms include buyout, growth equity, private equity energy and mezzanine funds, including fully liquidated partnerships. The US Buyout Fund Index and US Growth Equity Index reflect the performance of 839 U.S. buyout funds (formed between 986 and 07) and 39 US growth equity funds (formed between 986 and 07), respectively. CepreX-Cepres Private Equity Index The CepreX Private Equity Index is compiled using data from,6 North American funds. These funds cover industries such as Consumer industry, Healthcare/LS, Hightech/IT, Industrials and Infrastructure. Funds from all stages except venture capital form a part of this index, falling under the time frame 000-December 07. ILPA (Institutional Limited Partners Association) U.S. Private Equity Index The ILPA U.S. Private Equity Index is a subset of ILPA Private Markets Benchmark and excludes the performance of venture capital funds. The ILPA Private Markets Benchmark is compiled using data from over 3,849 global (U.S. & ex U.S.) funds formed between 98 and 07. Fund types included in the ILPA Private Markets Benchmark are private equity, venture capital, distressed securities, fund of funds, secondary funds and natural resource funds. State Street GX Private Equity Index The U.S. Private Equity Index is compiled using data from,300 U.S. buyout and private debt funds formed between 980 and 07 Q4. The U.S. Buyout Fund Index reflects the performance of 970 U.S. buyout funds (formed between 980 and 07 Q4). The U.S. Private Debt Fund Index contains 330 U.S. mezzanine and distressed funds (formed between 988 and 07 Q4). Preqin Private Equity Horizon IRRs Horizon IRRs indicate how the private equity industry is performing during a defined period (i.e. during year, 3 years, 5 years and 0 years). Horizon IRRs are calculated using the fund s net asset value as a negative outflow at the beginning of the period, any cash paid or received during the period and the fund s residual value as a positive inflow at the end of the period. Preqin calculates horizon IRRs using cash flow data for over,800 private equity funds. All returns reported by private equity benchmarks are calculated on an aggregated basis, net of fees, expenses and carried interest. Returns over periods exceeding one year are annualized. PAGE 6
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