Has Persistence Persisted in Private Equity? Evidence from Buyout and Venture Capital Funds

32 Pages Posted: 23 Nov 2020 Last revised: 23 Dec 2022

See all articles by Robert S. Harris

Robert S. Harris

University of Virginia - Darden School of Business

Tim Jenkinson

University of Oxford - Said Business School; European Corporate Governance Institute (ECGI)

Steven N. Kaplan

University of Chicago - Booth School of Business; National Bureau of Economic Research (NBER); European Corporate Governance Institute (ECGI); University of Chicago - Polsky Center for Entrepreneurship

Ruediger Stucke

Warburg Pincus LLC

Multiple version iconThere are 3 versions of this paper

Date Written: November 14, 2022

Abstract

This paper presents new evidence on performance persistence for U.S. private equity (buyout and venture capital) funds. We use high quality cash-flow data from Burgiss’s large sample of institutional investors (as of December 2020) which allows us to examine how persistence has changed over more than three decades of fundraising. Venture capital (VC) performance remains remarkably persistent across funds raised by the same general partner (GP). In contrast, buyout funds’ performance persistence becomes noticeably weaker over time. The patterns are different when we restrict the analysis to information that would have been available to investors – interim performance on the previous fund at the time a new fund is raised – rather than using final, or latest, performance. We find little evidence of persistence for buyouts, especially post-2000. We continue to find persistence for VC funds though it declines post-2000. The differences are driven by interim performance reported at the time of fundraising being only moderately correlated to final performance and GPs avoiding fundraising when interim performance is poor. Finally, we look at GPs who introduce new fund styles and find that performance is noticeably lower for buyouts (but not VC). Exploring the reasons for these divergent trends in persistence between buyout and VC is a promising area for future research.

Keywords: Private equity, performance persistence, venture capital

JEL Classification: G11,G24

Suggested Citation

Harris, Robert S. and Jenkinson, Tim and Kaplan, Steven Neil and Stucke, Ruediger, Has Persistence Persisted in Private Equity? Evidence from Buyout and Venture Capital Funds (November 14, 2022). University of Chicago, Becker Friedman Institute for Economics Working Paper No. 2020-167, Available at SSRN: https://ssrn.com/abstract=3736098 or http://dx.doi.org/10.2139/ssrn.3736098

Robert S. Harris

University of Virginia - Darden School of Business ( email )

P.O. Box 6550
Charlottesville, VA 22906-6550
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434-924-4823 (Phone)
434-924-4859 (Fax)

HOME PAGE: http://www.darden.virginia.edu/faculty/harris.htm

Tim Jenkinson

University of Oxford - Said Business School ( email )

Park End Street
Oxford, OX1 1HP
United Kingdom
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+44 1865 288831 (Fax)

HOME PAGE: http://www.sbs.oxford.edu/timjenkinson

European Corporate Governance Institute (ECGI)

c/o the Royal Academies of Belgium
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1000 Brussels
Belgium

HOME PAGE: http://www.ecgi.org

Steven Neil Kaplan (Contact Author)

University of Chicago - Booth School of Business ( email )

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Chicago, IL 60637
United States
773-702-4513 (Phone)
773-702-0458 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
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European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

University of Chicago - Polsky Center for Entrepreneurship

Chicago, IL 60637
United States

Ruediger Stucke

Warburg Pincus LLC ( email )

450 Lexington Ave
New York, NY 10017

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