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How relevant is a private equity fund manager’s track record?

by Bronwyn Williams

  • 08 Jan 2010
  • PE

Investors are always keen to review a fund manager’s track record before committing to a new fund, as it provides them with something with which to analyse how a potential investment may perform. Preqin’s Performance Analyst ranks funds according to their vintage, strategy and regional focus, and by collating the data it is possible to gain insight into a fund manager’s success rate.

The results show that fund managers with a top-quartile fund go on to have their next fund ranked in the top quartile in 40% of cases and in the second quartile in 30% of cases, while only underperforming the median with their follow-on fund in 30% of cases. This demonstrates that GPs with a top-quartile fund outperform the median benchmark with their next fund in 70% of cases.

Bottom-quartile fund managers go on to have their next fund ranked in the bottom quartile 40% of the time. 14% of bottom-quartile fund managers have their next fund ranked in the top quartile, while 18% have their next fund ranked in the second quartile. This demonstrates that fund managers' mobility between the quartiles with each fund is relatively low.

With IRRs and Value Multiples for 4,900 funds worldwide, Preqin’s Performance Analyst database is the perfect tool to analyse the performance of private equity funds and assess the risk-return patterns.

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