The Performance of Private Equity

49 Pages Posted: 21 Feb 2012 Last revised: 4 Apr 2012

See all articles by Chris Higson

Chris Higson

London Business School

Rüdiger Stucke

Warburg Pincus; University of Oxford

Date Written: March 2, 2012


We present conclusive evidence on the performance of private equity, using a high quality dataset of fund cash flows that covers about 85 percent of capital ever raised by U.S. buyout funds. For almost all vintage years since 1980, U.S. buyout funds have significantly outperformed the S&P 500. Liquidated funds from 1980 to 2000 have delivered excess returns of about 450 basis points per year. Adding partially liquidated funds up to 2005, excess returns rise to over 800 basis points. The cross-sectional variation is considerable with just over 60% of all funds doing better than the S&P, and excess returns being driven by top-decile rather than top-quartile funds. We document an extreme cyclicality in returns with much higher figures for funds set up in the first half of each of the past three decades, and correspondingly lower returns towards the end of each decade. However, we find a significant downward trend in absolute returns over all 29 vintage years. Our results are robust to measuring excess returns via money multiples instead of IRRs, and are essentially unchanged when pricing residual values at observed secondary market discounts.

Keywords: Private Equity, Leveraged Buyouts, Performance Measurement

JEL Classification: G11, G15, G24, G34

Suggested Citation

Higson, Chris and Stucke, Rüdiger, The Performance of Private Equity (March 2, 2012). Available at SSRN: or

Chris Higson

London Business School ( email )

Sussex Place
Regent's Park
London, NW1 4SA
United Kingdom
+44 171 262 5250 (Phone)
+44 171 724-7875 (Fax)

Rüdiger Stucke (Contact Author)

Warburg Pincus ( email )

450 Lexington Ave
New York, NY 10017
United States

University of Oxford ( email )

Park End Street
Oxford, OX1 1HP
Great Britain

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