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. In this edition, we continue a series exploring cash flow management, focusing this time on allocation construction. Key takeaways include:
- Spreading annual commitments across 10 funds rather than allocating to a single PE fund can reduce the standard deviation of quarterly capital calls in the first three years from 8.0% to 4.0%.
- When initiating a PE allocation, an initial “ramp” period of relatively larger commitments decreases the time it takes to reach full allocation but can also lead to overshooting the target allocation; however, our model suggests that LPs can prudently incorporate a ramp period that decreases the time to full allocation with limited risk of overshooting.
- Once a target allocation has been met, the unfunded portion of the allocation trends toward 30%.