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Apr
25
2012
Average U.S. buyout fund performance has
exceeded that of public markets for most vintages for a long period of time. The
outperformance versus the S&P 500 averages 20% to 27% over the life of the fund and
more than 3% per year. Average U.S. venture capital funds, on the other hand,
outperformed public equities in the 1990s, but have underperformed public equities in
the 2000s. Using individual fund data, we explore the relationship between absolute
measures of performance – internal rates of return (IRRs) and multiples of invested
capital – and performance relative to public markets. Within a given vintage year,
performance relative to public markets can be predicted well by a fund’s multiple of
invested capital and IRR, so we are able to estimate the performance relative to public
markets that would have been derived from the other commercial datasets, had the
required cash-flow data been available.
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