Setting the Benchmark: Spotlight on Private Equity

21 Pages Posted: 17 Nov 2020

See all articles by Gitanjali Swamy

Gitanjali Swamy

PCRI, Harvard Business School; IoTask; University of California, Berkeley; Auto-ID Center, MIT

Hossein Kazemi

affiliation not provided to SSRN

Irina Zeltser

affiliation not provided to SSRN

Edward Szado

Providence College

Date Written: 2012

Abstract

What is Benchmarking?

Benchmarking is the process of comparing a firm’s business processes and performance metrics to those of the firm’s industry or another industry. The benchmarking process may focus on specific segments of the industry such as the top-performing firms or the “average” firm. Dimensions typically measured are quality, time, cost, risk and return. The term benchmarking was first used by cobblers to measure people's feet for shoes. They would place someone's foot on a "bench" and mark it out to make the pattern for the shoes. In the investment industry, benchmarking is the process of finding a quantifiable standard against which to measure a portfolio’s performance. The focus of this essay is on benchmarking for investment products and in particular for private equity investments. First, we discuss the desirable properties that a proper benchmark should possess. Second, we present a framework for classification of asset classes depending on the liquidity of the product itself, liquidity of its underlying assets, and to the degree that the product is actively managed. Third, we discuss two broad approaches to benchmark construction and then discuss the role of benchmarks in the evolution of asset classes. Finally, we examine various private equity benchmarks and discuss their properties.

Keywords: Alternative Assets, Private Equity, Benchmarking, PME, Valuation

Suggested Citation

Swamy, Gitanjali and Kazemi, Hossein and Zeltser, Irina and Szado, Edward, Setting the Benchmark: Spotlight on Private Equity (2012). Available at SSRN: https://ssrn.com/abstract=3702076 or http://dx.doi.org/10.2139/ssrn.3702076

Gitanjali Swamy (Contact Author)

PCRI, Harvard Business School ( email )

114 Western Ave
Allston, MA 02134
United States

HOME PAGE: http://www.privatecapitalresearchinstitute.org/people.php

IoTask ( email )

One Broadway, 14th floor
Cambridge, MA 02142
United States
7819753345 (Phone)

HOME PAGE: http://www.iot-ask.com

University of California, Berkeley ( email )

310 Barrows Hall
Berkeley, CA 94720
United States

Auto-ID Center, MIT ( email )

Hossein Kazemi

affiliation not provided to SSRN

Irina Zeltser

affiliation not provided to SSRN

Edward Szado

Providence College ( email )

United States

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