In our ongoing webinar series, Fund Performance Explained, PitchBook analysts will discuss using traditional performance metrics like IRR and cash multiples through the lens of the latest PitchBook Benchmarks report.
PitchBook Benchmarks leverage a differentiated data collection process that results in one of the most robust fund performance datasets in the market. Further, we're able to provide visibility into the underlying funds and metrics used to construct each benchmark. Every edition includes a range of performance statistics across PE, VC, debt, real assets, fund-of-funds and secondaries strategies.
- Despite worries that subscription credit lines are inflating IRR, we do not find any evidence that the IRR of newer vintages is being manipulated by these facilities or other means. The reported IRR of more recent vintages can appear to be “inflated” relative to cash-on-cash returns when compared to historical performance, but we find this apparent inflation dissipates when controlling for the age of the funds.
- If aggressive markups early in the holding period were historically inflating IRR, we would expect to see IRRs peak early in a fund’s life and to subsequently fall as the holding period extends. While we do find that most funds tend to hit their peak IRR around year seven, the median fund historically has been able to maintain that level through liquidation. But that still means roughly half of managers eventually are revising their IRRs lower in the end stages of a fund’s life.