Measuring Private Equity Performance

The old adage that investment managers use is that past performance does not guarantee future results and you should not rely on past performance as a guarantee of future investment performance.

The reality is that past performance is a critical component in the private equity investment decision making process. One of the first things an investor does when evaluating a private equity fund manager is to look back at their previous history – how have their funds performed and how did they create value? Usually this will begin with a review of the high-level performance numbers and extends into a more detailed analysis of their track record. And while a track record will not provide an investor with all the answers, it will provide the important questions they need to ask in further due diligence to gather data and make informed manager selection decisions.

Investors who are required to select and monitor investment managers should develop a basic understanding of investment statistics. Quantitative tools can provide you with good insight that you can use in your qualitative interviews with managers and when monitoring your investments.