View all insights

High Inflation and PE Deal Performance: US deal returns during rising and high inflation (1986-1991)

How high inflation affects private equity investment is a complicated question. But the industry has undergone previous periods in similar environments. To offer a case study into how historic deals have performed in these circumstances, we look at private equity deal returns during the previous historic period of high inflation: 1989-91. 

The last time US inflation passed 6% was in September-December 1990

  • Using US Federal Reserve data, we identified the last time inflation reached 6%, in late 1990. We further identified two phases: a pre-inflation period in 1986-88, and a high-inflation period in 1989-91. 

  • We then examined the returns of US private equity deals entered during these two phases, to see how high inflation affected performance in the industry.

Deals in the pre-inflation period have markedly lower returns than those entered in the high inflation period

Deals entered in 1986-88 had generally lower median IRRs than their counterparts entered in 1989-91. In fact, median returns in 1991 were more than twice as high as in 1986. 

  • Returns fell across most quartiles from 1986-88, before climbing successively to 1991. Bottom quartile returns did not exceed negative 15% at all in the pre-inflation period. 

  • The difference between the top and bottom quartiles was mostly consistent throughout, ranging from 50 to 62 percentage points across 1987-1991. Deals made in 1986 saw a much wider spread of 87pp. 

Read part 2 on

General partners
Investing trends
Investment data
Market performance
Market research
Research reports
Risk management

Read next


How Top Quartile Private Equity Deals Create Value

For private equity deals entered since 2010, the median deal has added between 55% and 75% of its original value between entry and exit. Among top quartile value creators, that growth increases to 350-360%. Top quartile deals have created 4-8X as much value as the median.


Private Equity Performance During a Recession: Deal Performance in the Global Financial Crisis

As the prospect of a global recession once again looms over financial markets, DealEdge has looked at how private equity deal performance was affected by the last major recession: the Global Financial Crisis (GFC) of 2008-9. 


Building a Better Private Market Risk Factor Model

CEPRES and Qontigo are developing a suite of factor risk models that provide broad coverage of the private asset space in Axioma Risk, Qontigo’s enterprise risk management platform.

Client Exclusives

Private credit: Spotlight on deals — the winners and losers & bounce back from the crisis

Read more

Navigating Private Debt: A Deep Dive into Historical Risk and Returns

Read more