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 Private Equity IRR Reports: |
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Since the October 1981 inception to June 30, 2009, the WSIB Private Equity
Portfolio has generated $8.4 billion in profits.
Although it is updated quarterly there is generally a two-quarter lag in reporting this performance
information due to the time allowed and necessary to compile and corroborate the financial data.
The IRRs contained in this report are calculated by Capital Dynamics for WSIB based on
information provided by the general partner (e.g. cash flows and valuations). Such IRR calculations
have not been confirmed by the general partners. The result of WSIB's IRR calculation may differ from
that generated by the general partner or other limited partners, primarily due to lack of industry
valuation standards, differences in the investment pace and strategy of various funds, date of close,
sale of distributed stock, and other factors.
One of the most important factors that must be considered in measuring and comparing results is the
J-Curve Effect used to plot fund returns against time (from inception to termination). It's a common
practice to include management fees and start-up costs in the first draw-down which does not produce an
equivalent book value. As a result, private equity funds in the early years show low or negative
returns. After three to five years when the first realizations are made, fund returns start to rise quite
steeply and the interim performance data then provides a reasonable indication of the definitive rate of
return. This period is generally shorter for buyout funds than for early-stage and expansion funds.
Generally, private equity partnerships take 10 to 12 years to realize full value. Most general partners
tend to calculate valuation conservatively which often results in differences between interim reported values
compared to the values realized when portfolio companies are sold. As you can see, there are many reasons why
comparisons of interim fund returns are not always clear-cut and meaningful.
The information below gives context to three important columns of data. |
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The "Commitment" column identifies the original amount WSIB agreed to invest in each fund |
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"Amount Contributed" represents the capital-or cash-in that's been contributed for investments and management fees |
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"Total Distributions" represent cash-out or distributions that WSIB has received back from the fund. |
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