US buyout funds returned 14.5% annually over the past decade, trailing the Russell 3000 stock index over that period, venture capital firm Andreessen Horowitz said in a newsletter published Nov. 4.
US venture funds returned 17.6% annually over the same period, the firm said in “Is Private Equity Cooked?” The funds beat the index by 2.3 percentage points. The firm, which invests in venture capital, argued that technology buyouts face problems that extend beyond the economic cycle.
The newsletter compared historical fund returns, company debt and valuations, drawing on periods from earlier technology booms through the first half of 2026. Its central argument was that buyouts work best when technology businesses become predictable enough to support borrowing, while venture investing benefits from technological change.
Andreessen Horowitz said the strongest quarter of venture funds outperformed comparable buyout funds during the internet expansion and again during the rise of mobile computing and cloud services. But venture lagged for funds launched roughly between 1998 and 2005, around the dot-com collapse and its aftermath.
The firm said venture funds raised valuations of their technology holdings by 16% in the first half of 2026, while buyout funds cut theirs by 4%. It argued that buyout valuations may fail to reflect financial strain because owners set values without an outside transaction.
Debt adds to that strain, the firm said. Private equity-backed midsized companies carried net debt of 4.7 to six times adjusted earnings before interest, taxes, depreciation and amortisation across 2019-25 fund vintages, J.P. Morgan figures cited in the newsletter showed.
That compared with twice those earnings for the median S&P 500 company, the same figures showed. Andreessen Horowitz said buyout investors had therefore earned less than public stock investors while their underlying companies carried substantially more debt.
The firm also said investors waited longer to receive cash from buyouts, with exits taking about seven years on average, against five to six years during 2010-21. It acknowledged that venture exits also slowed sharply after 2021.
For US funds launched between 2007 and 2016, the top 5% of venture funds returned cash equal to 5.3 times investors’ contributions, Andreessen Horowitz said. The comparable buyout figure was 3.5 times, although the firm argued that access to the strongest venture managers matters more than median performance.
Buyout firms have increasingly sold companies to new funds they also manage, the newsletter said. Such transactions accounted for 14% of private equity exit value in the first half of 2026, against 5% in 2020, Jefferies figures cited by the firm showed.
The firm acknowledged that some buyout difficulties reflect the economic cycle and that lower interest rates would ease debt costs. But it argued that rate cuts would not restore the conditions of the 2010s, when falling borrowing costs and expanding funds supported buyout returns.
