Two Ways Successful Private Equity Funds Stand Out Early On

It’s difficult to analyze private equity fund performance in the first few years of its life cycle because net cash flows are generally still negative – fund managers are in the process of acquiring and bolstering private companies. But a study of more than 300 US buyout funds found that there are two early indicators of whether a fund will ultimately land in the top or bottom quartile of PE fund performance: early distributions and a shallow J-curve.

“Analysis of current immature funds can also be invaluable when assessing new primary investments. The ability to evaluate patterns of calls, distributions and NAV uplifts of a GP’s current fund can inform a decision when considering an investment in a subsequent fundraising,”...