Key Takeaways
- • Private-credit funds continued to lead returns in Q1 2024, with senior-debt, mezzanine-debt and distressed-debt funds each returning between 1.9% and 2.3% for the quarter, according to MSCI.
- • Venture-capital funds posted a 1.5% quarterly return in Q1 2024, outperforming buyout funds for the first time since 2021, though venture capital leads buyout by only 0.6% cumulatively since the end of 2019.
- • Private-equity distributions fell to 8.7% of valuation in Q1 2024, down from 11.6% in Q4 2023 and against a 2015-2019 average of 23.5%, with preliminary Q2 data pointing to further declines.
- • Real-estate funds recorded an eighth consecutive quarterly decline, and the 2014-2019 real-estate vintages have stalled in distributing capital.
- • Preliminary Q2 2024 data indicates contributions rose while distributions were likely to decrease, compounding net-cash-flow pressure on limited partners.
Summary
MSCI's latest update to its private-capital closed-end fund dataset shows private-credit funds maintained the strongest returns among major asset classes in Q1 2024, continuing a trend in which they ended 2023 with the highest annual returns. Senior-debt, mezzanine-debt and distressed-debt funds each returned between 1.9% and 2.3% during the quarter. Venture-capital funds began the year with a 1.5% quarterly return, outperforming buyout funds for the first time since 2021. Over the cumulative period since December 31, 2019, venture capital has outperformed buyout by just 0.6%.
Real-asset funds were mixed. Natural-resource funds returned 4.9% and infrastructure funds returned 0.9%, while real-estate funds registered an eighth consecutive quarterly decline as the commercial-property market continued to struggle. All returns are in USD, with quarterly figures calculated using the Modified Dietz method and not annualized.
Distributions remain a central concern for asset owners. MSCI reports private-equity distributions of 8.7% of valuation in Q1 2024, a decline from 11.6% in Q4 2023 and close to the 8.2% lows seen earlier in 2023. The 2015-2019 average distribution rate was 23.5%. MSCI notes some seasonality, with first-quarter activity typically lower, but says early Q2 indications point to further decreases in distributions and increases in contributions. That combination is likely to worsen net-cash-flow challenges, limiting asset owners' ability to fund new commitments from existing portfolios.
Vintage-level data points to stalled exits in venture capital and real estate. Venture-capital 2015-2017 funds have flattened, and 2018-2019 funds have fallen below the outer edge of the historical dispersion, on track to return capital more slowly than any vintage since 2005. Buyout funds show similar flattening but have fared better. The entire 2014-2019 real-estate vintage set has stalled, trailing the 2009-2013 vintages, which generally reached cash-flow breakeven by year seven. MSCI concludes that the private-capital outlook remains uncertain, though performance has generally been positive for most major private-asset classes since the lows of 2022.
Real-asset funds were mixed. Natural-resource funds returned 4.9% and infrastructure funds returned 0.9%, while real-estate funds registered an eighth consecutive quarterly decline as the commercial-property market continued to struggle. All returns are in USD, with quarterly figures calculated using the Modified Dietz method and not annualized.
Distributions remain a central concern for asset owners. MSCI reports private-equity distributions of 8.7% of valuation in Q1 2024, a decline from 11.6% in Q4 2023 and close to the 8.2% lows seen earlier in 2023. The 2015-2019 average distribution rate was 23.5%. MSCI notes some seasonality, with first-quarter activity typically lower, but says early Q2 indications point to further decreases in distributions and increases in contributions. That combination is likely to worsen net-cash-flow challenges, limiting asset owners' ability to fund new commitments from existing portfolios.
Vintage-level data points to stalled exits in venture capital and real estate. Venture-capital 2015-2017 funds have flattened, and 2018-2019 funds have fallen below the outer edge of the historical dispersion, on track to return capital more slowly than any vintage since 2005. Buyout funds show similar flattening but have fared better. The entire 2014-2019 real-estate vintage set has stalled, trailing the 2009-2013 vintages, which generally reached cash-flow breakeven by year seven. MSCI concludes that the private-capital outlook remains uncertain, though performance has generally been positive for most major private-asset classes since the lows of 2022.
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