Benchmarks

In depth

Private-market benchmarks answer one question: how did this fund perform compared to other funds of the same vintage and strategy. They are point-in-time pooled returns, net of fees and carry, calculated from quarterly fund financial statements that GPs submit to data providers. The two industry-standard series are Cambridge Associates Private Investment Benchmarks and PitchBook Benchmarks. Both publish quartile breakpoints (top, upper-mid, lower-mid, bottom) for IRR, TVPI, and DPI by vintage and strategy.

Vintage matters more than calendar year. A 2017 fund and a 2020 fund cannot be compared directly: the 2017 vehicle has six years of mark-up cycles and partial exits behind it; the 2020 vehicle is still inside the J-curve. Benchmark tables always segment by vintage year and report the same fund age across the cohort.

Why it matters

Benchmarks are how LPs decide who gets re-upped. A GP raising a third fund presents the performance of Fund I and Fund II against the vintage-matched benchmark. Top-quartile placement on at least one prior fund is effectively a prerequisite for institutional re-up in most LP allocation models. The Cambridge Associates research that funds need around six years to settle into their final quartile is the empirical anchor for why LPs hesitate to underwrite a GP off interim Fund II numbers if the first fund has not matured.

Worked example

A 2017-vintage US VC fund's TVPI versus the Cambridge Associates benchmark:

Year 7 fund TVPI = 3.1x
Year 7 benchmark top quartile breakpoint = 2.8x
3.1x ≥ 2.8x → Top quartile

At year three the fund looked average. By year seven it had moved into the top quartile, illustrating Cambridge Associates' finding that 80% to 90% of funds shift across at least three quartiles before settling. An LP exiting the position at year three on the secondary market would have locked in upper-mid performance and missed the eventual top-quartile result.