The Private Equity Fund Selection Expertise of Private Equity Fund of Funds Managers

by Bronwyn Williams

  • 12 Feb 2010
  • PE

Selecting the fund managers with good historical performance to invest in is key for all LPs. Fund of funds managers assert they have superior selection and due diligence skills, and thus these managers are able to attract various types of investors, both large and small. Fund of funds managers are particularly attractive for small investors, not only due to the aforementioned selection and due diligence skills, but also because they allow smaller investors to create a balanced portfolio private equity funds via a single commitment to a fund of funds partnership. Similarly smaller investors may lack the expertise and the internal resources to maintain a private equity investment staff while fund of funds managers are able to supply both.

Preqin holds data on 8,350 fund investments made by fund of funds managers. Considering only the fund of funds managers for which there is performance data on a minimum of 10 underlying portfolio investments, our sample is comprised of 4,159 underlying fund investments and 107 fund managers. The results show that 56% of the investments analysed in the sample were in top and second quartile funds, therefore indicating that these managers display above average selection skills.

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.

Continue browsing industry reports, publications, conferences, blogs and more on Preqin Insights