Traditionally, a private equity fund’s performance follows a J-shaped curve over time. In the early life of a fund, investments and restructuring push returns into negative territory. Performance gradually improves as these actions bear fruit, with returns turning gradually more positive until the fund is closed and the proceeds are distributed to investors.

The financial crisis has altered the private equity alphabet. New performance data from Preqin, a research firm, tracks the quarterly internal rates of return for various vintages of private equity funds. Funds launched in 2006 and earlier followed the usual J-shaped pattern until the downturn hit, with returns falling sharply between the third quarter of 2008 and the first quarter of 2009. Funds have recovered a bit since then, but many remain below water. Thus, as Preqin points out, recent private equity performance looks more like a W than a J.