Private equity returns over a rolling one-year period bounced back earlier this year to near the levels last seen almost three years ago, aided by rising financial markets and the subsequent growth in funds' underlying investments, according to Preqin, a research firm tracking this sector.

One-year horizon internal rates of return stood at 21.8 per cent in March this year, recovering from a nadir of -30 per cent a year ago, Preqin said in a quarterly review, having been as high as 26 per cent in December 2007.

The data is drawn from the research firm's database of more than 5,100 private equity funds, which it says account for about 70 per cent of all capital ever raised for the industry.

The figures showed that all strategies of private equity – buyouts, venture, fund of funds and mezzanine funds – posted positive one-year horizon IRRs in the quarter ending 31 March. Buyout funds enjoyed the highest returns, at 25.5 per cent; venture capital returned 10.7 per cent, fund of funds 10.5 per cent and mezzanine lagged at just 1.5 per cent.

Internal rates of return takes account of the complex timings of the investments and payouts on private equity deals; the IRR measure is not directly comparable to returns from securities such as listed stocks. However, Preqin notes that one-year returns to 31 March 2010 for the S&P 500 index of US stocks were, for example, 49.8 per cent. Over the long run, however, data has shown that private equity returns have outperformed those of listed equities.

Over the three-year period, meanwhile, IRRs to 31 March are negative, at -0.3 per cent, while the five-year IRR is 16.8 per cent.

Among other details, the figures showed that buyout funds which were launched in 2001 showed the highest median IRR – 28 per cent among vintages from 1999 onwards. That figure shows how funds launched in the aftermath of a sharp market tumble often fare well as these vehicles can buy assets cheaply and profit on any subsequent rebound.

“Recent vintages seem to still be showing the effects of the credit crisis, with median IRRs in the red for the vintages 2006 and onwards. These funds are still in the early stages of their fund lives and it must be emphasised that their performance could improve over time as underlying investments mature and are realised,” the report added.