Does size matter? In US LBO, yes.
This issue of FrontLine makes a comparison of return profiles and cash flow schedules of different types of LBO funds …
A few exceptional years have marked a decade and an asset class. The venture capital boom years of the decade 1990 have left investors with the wish to see them happen again. The analysis of that decade has shown that indeed it was unusual, not because of overall high TVPIs but mostly due to shorter time-to-liquidity. The 1990s recorded an average time-to-liquidity for US early-stage VC funds of 3.62 years, compared with 6.7 years for 2001-2010. However, overall performance for the decade does not look particularly good, with funds returning just 1.1x, compared with 1.57x for the 2000s. If a few vintage years made a strong impression on investors, the overall decade appears as fairly poor in terms of pooled average total value to paid-in (TVPI).
Said differently, the vintage years associated with the subsequent stock market crash have wiped out a significant part the overall outperformance of the decade. In that sense, wishing to return to the ‘golden years’ bears the risk of calling as well for a performance bust. The following decade, still partially in the making, contrasts with the 1990s in surprisingly positive ways.