Help: Creating Custom Benchmarks and Benchmark Comparisons

Use the Custom Benchmarks and Benchmark Comparison tools to summarize and compare the performance of funds that meet specific criteria or even a group of known funds. The Custom Benchmarks tool allows you to view performance and fund data for one group of funds, indicating the group’s performance as a whole and how individual funds compare to this group. The Benchmark Comparison tool shows multiple custom benchmarks at the same time, creating a visualization of pooled and median fund data for multiple fund segments.

This article will show you how to create and adjust your custom benchmarks and your benchmark comparisons. It will also discuss the tools for saving, sharing, and downloading the results.

You can create a custom benchmark directly within the Custom Benchmark and Benchmark Comparison tools. Or, you can turn fund search results into a benchmark group.

From the Custom Benchmarks or Benchmark Comparison tool

The Custom Benchmarks and Benchmark Comparison tool homepages are the starting point for most custom benchmark options.

1. Expand the Funds Analysis section on the left sidebar.
2. Hover over the Benchmarks tab.
3. To begin creating a single benchmark group, click Custom Benchmarks. To begin comparing two or three benchmark groups against each other, click Benchmark Comparison.

In both tools, the landing page provides three ways to get started. Each option helps you kick off your custom benchmark. You will also be able to refine your criteria later.

• PitchBook Benchmarks – Choose from preset PitchBook Benchmarks based on common fund strategies: Private Equity, Venture Capital, Real Estate, Private Debt, Fund of Funds, or Secondaries.
• Saved List or Search – Load funds into the Custom Benchmarks tool from your Saved Searches and Lists. You can choose from investors or funds lists and searches.
• Your Criteria – Populate key criteria (vintage, fund size, fund strategy, and location) to start creating a benchmark group. Once you populate one or more fields, the Create button becomes active within the menu.

From fund search results

If you have created an Investors & Funds screener to search for investors or funds that match specific criteria, you can also create a custom benchmark from the funds in your search results.

1. On the Funds search results tab, select View as Custom Benchmark from the drop-down menu in the ribbon.
2. Click Go. This will take you to the Custom Benchmark tool and will create a benchmark group using these results.

In both tools, once you’ve made a selection and entered your initial criteria, you will see a visualization of the benchmark group’s performance. Use the Criteria column on the left to apply any additional filters that you need.

In the Benchmark Comparison tool, you can add up to two more benchmark groups to the analysis by clicking the Add Benchmark button in the upper lefthand corner of the screen. You have the same three options that appear on the tool’s homepage.

After adding these additional benchmark groups, you can make comparisons between the different groups of funds.

The menus at the top of the benchmarking window allow you to update the performance metrics and comparison groups used in the display. You can also adjust whether these metrics are presented as quartiles and deciles or as pooled data.

Metric menu

The Metric menu controls which data point is used as the primary basis for analyzing funds in a group.

• IRR – Internal Rate of Return (IRR) is a typical measure of how funds measure performance. IRR is technically a discount rate: the rate at which the present value of a series of investments is equal to the present value of the returns on those investments. It is determined when the net present value of the cash outflows (the cost of the investment) and the cash inflows (returns on the investment) equal zero, with the discount rate equal to the IRR.
• TVPI – Total Value Paid-in (TVPI) represents the ratio of the current value of remaining investments within a fund plus the total value of all distributions to date relative to the total amount of capital paid into the fund to date. TVPI should equal RVPI + DPI.
• DPI – Distributed to Paid-in (DPI) is the ratio of capital distributed to the limited partners by the investor (fund manager) relative to the initial contribution made by the limited partner to the investor’s fund. Also called the realization multiple, this figure is the ratio of money returned (distribution) to money paid in (contributions inclusive of fees) to the partnership. Note that PitchBook includes the fees along with capital calls to show the total amount paid into the investment.
• RVPI – Residual/Remaining Value of Invested Capital/Paid-in Capital (RVPI) is a performance metric that provides a measurement of the unrealized return of a fund as a proportion of the total paid-in or contributed capital.
• All Cash Multiples – This metric takes DPI, RVPI, and TVPI all into account.
• KS-PME – Kaplan-Schoar PME provides a market-adjusted cash multiple. If the end value is higher than 1, then the private market fund has outperformed the respective public market index, and if it’s lower than 1, it underperformed
• Management Fee – The annual fee LPs pay to GPs, usually around 2% of funds under management.
• Carry – The percentage share of profits realized by the fund accrued to the GP, usually around 20% of returns over a hurdle rate.
• Investment Term – The total period in which the fund is authorized to invest actively, measured in years.
• Fund Term – The total life of the fund in years from final close to final liquidation, measured in years.
• Hurdle Rate – The minimum percentage return the fund needs to achieve for the GP to earn the carry rate.
• GP Commitment – The percentage of a fund’s capital contributed by the GP, usually around 1%.

Group By menu

The Group By menu indicates the category used for the x-axis of the chart.

Most metrics in the Group By menu contain the same options. However, IRR, TVPI, DPI, and RVPI also contain an option for Time Series. If you choose Time Series in this menu, an additional Time Series Type menu appears. This may contain some or all of the options Rolling, Horizon, and Inception to Date, depending on the data point selected.

Chart style

Use the Chart style menu to switch between two chart options:

• A box-and-whiskers plot that shows decile and quartile cutoffs for metric ranges.
• A line-and-bar chart that displays the metrics as pooled calculations. In this view, you can overlay a secondary metric onto the chart.

The Chart style menu does not appear when you have chosen to group data by Time Series.

To learn about our calculations for pooled data points, see the Calculation methodology section of this article.

Once you have selected the criteria and display you wish to see, you can click into a group to see the underlying funds in the analysis. For example, to look into one vintage year in detail, click the box aligned with that year in the chart. The chart and the list will update to show data for this specific vintage year. In this detailed view, you can select up to ten funds use the Plot Funds menu to plot data for specific funds in your list against the benchmark to see where they stand.

The fund data table that appears below the chart lists subgroups within your benchmark group, separated by the characteristic you selected in the Group By menu above. In the Benchmark Comparison tool, this table will also indicate which main benchmark group is being described in the row.

• Most columns in the data table show the statistics associated with the cutoffs for quartile and decile performance for various metrics.
• The # of Funds with Terms column shows how many funds in the group have fund terms data available.
• In the # of Funds column, click on any blue number to see the underlying fund list and data related to that specific fund.
  
  • In this view, the As of Quarter column indicates the quarter that the data is drawn from for each fund.

When you have created a group of funds, you can save it as a list to revisit it later.

• In the Custom Benchmarks tool, click the blue Save as List button in the top right corner.
• In the Benchmark Comparison tool, save the funds as a list by clicking the ellipses next to the fund group in the left column and selecting Save as List (shown below).

You can also share your custom benchmark or benchmark comparison with another person, regardless of whether that person is within your PitchBook license.

To do so, click the Share button or the smaller Quick Link icon in the top right corner. If you click the Share button, the Share menu will appear, giving you two options for sharing your custom benchmark.

If you choose Invite with Email, type in the email address of the person you’d like to send your custom benchmark to.

• If the recipient has a PitchBook license, they will be able to view a copy of your custom benchmark.
• If the recipient does not have a PitchBook license, they will receive an Excel download of your custom benchmark. This will count toward your download limits.

If you choose the Share Link option or use the Quick Link button, click Copy Link to copy the custom benchmark link to your clipboard for easy sharing. For these options, only users with a PitchBook license will be able to view your custom benchmark.

If you decide you’d like to download your custom benchmark or benchmark comparison, navigate to the Download button towards the top right of your chart. You have the option of downloading via Excel or PNG.

Pooled Calculations

To provide an aggregate view of performance for specific strategies and peer groups, we combine (or “pool”) cash flow data from a group of funds to calculate “pooled” metrics, including Horizon IRRs and Inception to Date cashflows. All cash flows and NAVs for each fund in the sample group (e.g., all private capital funds, 2004 vintage VC funds, etc.) are aggregated in the calculation. The weighting for each fund in a peer group can be found by dividing the respective fund’s contributed capital by the aggregated sum of contributed capital for the peer group.

To be included in pooled calculations, a fund must have: (i) at least one performance report within two years of the fund’s vintage and (ii) performance data in at least 45% of applicable reporting periods. For periods that lack performance data, a straight-line interpolation calculation is used to populate the missing data; interpolated data is used for approximately 10% of reporting periods, a figure that has been steadily declining. We require cashflow data from at least five funds to produce pooled calculations.

Equal-Weighted Pooled Calculations

Using the same methodology as the pooled calculations, the equal-weighted version expresses each fund’s cash flows and ending NAV as a ratio of fund size. The result is that each fund in these calculations has an equal impact on the output, regardless of the fund size.

Cash Multiples

• DPI (Distributed to Paid-in) – A measurement of the capital that has been distributed back to LPs as a proportion of the total paid-in or contributed capital. DPI is also known as the cash-on-cash multiple or the realization multiple.
• RVPI (Remaining Value Paid-in) – A measurement of the unrealized return of a fund as a proportion of the total paid-in or contributed capital.
• TVPI (Total Value Paid-in) – A measurement of a fund’s realized and unrealized value as a proportion of the total paid-in or contributed capital. Also known as the investment multiple, TVPI can be found by adding together the DPI and RVPI of a fund.

Horizon IRR (Pooled Calculation)

Horizon IRR is a capital-weighted pooled calculation that shows the IRR for a certain range in time. For example, one-year horizon IRR figures could begin in Q3 2018 through the end of Q2 2019, while the three-year horizon IRR is for the period beginning in Q3 2016 through the end of Q2 2019. In cases where the sample has unrealized value, the ending NAV is treated as a cash outflow in the last reporting period.

Rolling IRR (Pooled Calculation)

By calculating a one-year horizon IRR over subsequent periods, the rolling IRR provides a time series view of performance. The x-axis value represents the ending period for each one-year horizon calculation in the series.

Inception to Date (Pooled Calculation)

These pooled calculations for both IRR and cash multiples begin with the first cashflow of each fund, normalizing for differences in vintage year. The x-axis of the Inception to Date charts represents the number of years since the first capital call.

Reported Internal Rate of Return (IRR)

IRR represents the rate at which a historical series of cash flows are discounted so that the net present value of the cash flows equals zero. All decile, quartile, and median values are derived using IRR values directly reported to PitchBook (i.e., PitchBook does not calculate these IRR values).

KS-PME (Pooled Calculation)

PME metrics benchmark the performance of a fund (or group of funds) against an index. For each respective peer group, fund cashflows are aggregated and the PME figure is calculated using the chosen benchmark. All PME figures in Custom Benchmarks are calculated using the Kaplan-Schoar PME method:

When using a KS-PME, a value greater than 1.0 implies outperformance of the fund over the public index (net of all fees). For more details on the methodology, please contact [email protected].

• How to use PitchBook Benchmarks – Our PitchBook Benchmarks provide benchmarks with pre-formed peer groups created using methodology developed by our PitchBook Institutional Research Group. This feature now allows you to create your own custom benchmarks by selecting the vintage, location, size, access point, and fund strategy. However, a more limited set of calculation metrics are available in that tool.