Harris et al Flashcards
Has Performance Persisted
Key Findings - Performance Persistence
Venture Capital:
strong persistence across successive funds raised by the same general partner (GP). GPs with top-performing funds are likely to achieve strong performance in their next funds, though this persistance slightly declines post-2000-
Buyout Funds:
Performance persistence weakens over time, particularly post-2000. Interim performance (measured during fundraising) is a poor predictor of final performance.
Key Findings - Interim vs. Final Performance
GPs often raise new funds based on interim performance of ongoing funds, but interim performance is only moderately correlated with final outcomes. This weakens the utility of using interim performance as an indicator for future success, particularly for buyout funds.
Key Findings - Effect of Strategy Shifts
- for buyout funds, introducing new fund styles (e.g. moving from core to secondary styles) significantly reduces performance
- in VC, performance does not decline with new fund styles, likely due to the difficulty in replicating successful VC strategies and networks
Key Findings - Fundraising Trends
GPs of poorly performing funds tend to delay or avoid fundraising, leading to fewer low-performing funds in the sample during fundraising periods.
Implications for Investors - Venture Capital
Investors can rely on performance persistence to identify promising GPs. However, compression in returns among top-quartile funds post-2000 makes it harder to achieve outsized gains.
Implications for Investors - Buyout Funds
Investors should be cautious in using interim performance as a signal for future success. The lack of persistence post-2000 suggests that past performance is no longer a reliable predictor.
Implications for Investors - Fund Style
Assessing whether a GP is launching a new fund style is critical, particularly for buyout funds, where such shifts often lead to underperformance
Did the study find persistence of performance between the previous and the next PE fund?
Venture Capital: yes, strong persistence between successive VC funds raised by same GP. GPs with top-quartile funds often replicate their success in subsequent funds
Buyout Funds: persistence is weaker, especially post-2000. While historical data shows some persistence for earlier buyout funds, it largely disappears in more recent periods
In which asset class is performance persistence the strongest?
Venture Capital -> exhibits the strongest performance persistence. GPs with successful prior funds are significantly more likely to produce strong-performing subsequent funds compared to buyout GPs
How persistent is fund performance when measured on the basis of the information that is available at the time of fundraising?
Venture Capital: Some persistence remains, though it is weaker than when measured using final performance
Buyout Funds: Interim performance at fundraising is a poor predictor of final performance, with little evidence of persistence
