Private Equity: Risk/Return by Fund Type (Vintages 2011-2017)*
Direct lending vehicles invest across the capital structure. The fund’s investment strategy and the parts of the capital structure it focuses on will dictate the risk/return profile, but this tends to be the lowest risk, with the lowest return potential across debt strategies.
Distressed debt will yield greater rewards due to the higher risk of default by companies. In order to reap the greatest returns for this strategy, debt would be purchased at a significant discount.
Mezzanine comprises investments in debt subordinated to the primary debt issuance and senior to equity positions. As such, the investments within mezzanine vehicles are riskier than more senior debt.
Special situations targets investments for companies in distress. There is a significant price dislocation as the value is impacted by certain circumstances. Returns within this strategy are similar to distressed debt, but may be subject to greater risks.
Risk - Standard Deviation of Net IRR
Return - Median Net IRR
Fund of Funds
*The size of each circle represents AUM as of March 2020
**Excluding Early Stage.
Source: Preqin Pro. Most Up-to-Date Data