Private Equity Fund Performance

Research from Bain & Co. found 75% of all private equity funds could “legitimately be ‘top quartile’ performers, depending on the type of data used for comparison” (source: WSJ, August 4, 2014). Services such as Preqin, Thomson Reuters, and Cambridge Associates LLC are considered to be objective sources for accurately reporting private equity performance. Professor Korteweg at USC believes high private equity returns are due to mostly luck and some skill.

 

According to Preqin, from 1980 through 2010, the bottom quartile of private equity performers had annual positive annual returns every year except for 1-2 slightly negative years in the late 1990s. For almost every year, returns generally ranging from 5% to 11%. The median performers had positive returns every year, ranging from 6% to 23%. The top quartile also had positive returns each year, ranging from 10% up to 40%.

 

Most private equity investments operate as limited partnerships and last roughly 10 years. Judging the success of a private equity investment can be difficult until its later years when assets are beginning to be sold off.