Private Equity Performance: Returns, Persistence and Capital

43 Pages Posted: 29 Jun 2003 Last revised: 26 Oct 2022

See all articles by Steven N. Kaplan

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

Antoinette Schoar

Massachusetts Institute of Technology (MIT) - Sloan School of Management; National Bureau of Economic Research (NBER)

Date Written: June 2003

Abstract

This paper investigates the performance of private equity partnerships using a data set of individual fund returns collected by Venture Economics. Over the sample period, average fund returns net of fees approximately equal the S\&P 500 although there is a large degree of heterogeneity. Returns persist strongly across funds raised by individual private equity partnerships. Better performing funds are more likely to raise follow-on funds and raise larger funds than funds that perform poorly. This relationship is concave so that top performing funds do not grow proportionally as much as the average fund. Finally, market entry in private equity is cyclical. Funds (and partnerships) started in boom times are less likely to raise follow-on funds, suggesting that these funds subsequently perform worse. Several of these results differ markedly from those for mutual funds.

Suggested Citation

Kaplan, Steven Neil and Schoar, Antoinette, Private Equity Performance: Returns, Persistence and Capital (June 2003). NBER Working Paper No. w9807, Available at SSRN: https://ssrn.com/abstract=420321

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Antoinette Schoar

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