High Level of Performance Persistence Exists Among Private Equity and Venture Capital Funds
SEATTLE and NEW YORK and SAN FRANCISCO and LONDON, June 14, 2018 /PRNewswire/ — PitchBook, the premier data provider for the private and public equity markets, today released fund performance data through 3Q 2017 from its stand-alone performance measurement product, PitchBook Benchmarks. The comprehensive performance data is designed to help limited partners (LPs) and general partners (GPs) better understand private market fund performance relative to broader asset classes and other PE and VC strategies. Since last quarter, PitchBook has added more than 140 private capital funds to the Benchmarks data set, which now includes nearly 4,000 private market funds. In this edition, PitchBook examines performance persistence across active PE and VC fund managers and finds strong performance persistence between funds, and that the level of persistence rises as a firm raises additional funds. In aggregate, funds that deliver top-quartile performance are followed by a top-quartile successor fund 39% and 34% of the time for PE and VC, respectively.
The PitchBook Benchmarks PDF and Excel data packs are available for download here.
«Both PE and VC funds show a clear performance persistence within fund families, especially towards the ends of the return distribution,» said James Gelfer, senior analyst at PitchBook. «Our data also shows that the level outperformance persistence rises as a GP raises additional funds; however, we found similar findings in underperformance, indicating that LPs are granting too much flexibility to subpar GPs. Although there are caveats, our data seems to suggest LPs would be well-advised to consider past performance when evaluating future commitments.»
Key findings from the latest analysis of PitchBook Benchmarks, include:
- The top-quartile persistence from the first to second funds is 38% and 26% for PE and VC, respectively.
- Performance persistence increases from second to third fund in a fund family, with 43% of top-quartile PE funds followed up by another top-quartile fund. Similarly, 55% of top-quartile VC funds are followed up by another top-quartile fund.
- Persistence underperformance also exists for bottom-quartile funds. When the second fund in a fund family falls into the bottom quartile, the GPs’ third fund will also be bottom quartile 34% of the time for PE and 44% of the time for VC.
- Changes in net IRRs didn’t show a strong correlation with performance persistence.
For more information about PitchBook Benchmarks, click here.
PitchBook is a financial data and software company that provides transparency into the capital markets to help professionals discover and execute opportunities with confidence and efficiency. PitchBook collects and analyzes detailed data on the entire venture capital, private equity and M&A landscape—including public and private companies, investors, funds, investments, exits and people. The company’s data and analysis are available through the PitchBook Platform, industry news and in-depth reports. Founded in 2007, PitchBook has offices in Seattle, San Francisco, New York and London and serves nearly 16,000 professionals around the world. In 2016, Morningstar acquired PitchBook, which now operates as an independent subsidiary.
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