Has Persistence Persisted in Private Equity? Evidence from Buyout and Venture Capital Funds

43 Pages Posted: 23 Nov 2020 Last revised: 22 Apr 2021

See all articles by Robert S. Harris

Robert S. Harris

University of Virginia - Darden School of Business

Tim Jenkinson

University of Oxford - Said Business School; European Corporate Governance Institute (ECGI)

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

Ruediger Stucke

Warburg Pincus LLC

Multiple version iconThere are 3 versions of this paper

Date Written: November 2020

Abstract

We present new evidence on the persistence of U.S. private equity (buyout and venture capital) funds using cash-flow data sourced from Burgiss’s large sample of institutional investors. Previous research, studying largely pre-2000 data, finds strong persistence for both buyout and venture capital (VC) firms. Using ex post or most recent fund performance (as of June2019), we confirm the previous findings on persistence overall as well as for pre-2001 and post-2000 funds. However, when we look at the information an investor would actually have – previous fund performance at the time of fundraising rather than final performance – we find little or no evidence of persistence for buyouts, both overall and post-2000. For post-2000 buyouts, the conventional wisdom to invest in previously top quartile funds does not hold. Using previous fund PME at fundraising, we find modest persistence, but it is driven by bottom, not top quartile performance. On the other hand, persistence for VC funds persists even when using information available at the time of fundraising. Therefore, the conventional wisdom of investors holds for VC.

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Suggested Citation

Harris, Robert S. and Jenkinson, Tim and Kaplan, Steven Neil and Stucke, Ruediger, Has Persistence Persisted in Private Equity? Evidence from Buyout and Venture Capital Funds (November 2020). NBER Working Paper No. w28109, Available at SSRN: https://ssrn.com/abstract=3735676

Robert S. Harris (Contact Author)

University of Virginia - Darden School of Business ( email )

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HOME PAGE: http://www.darden.virginia.edu/faculty/harris.htm

Tim Jenkinson

University of Oxford - Said Business School ( email )

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HOME PAGE: http://www.sbs.oxford.edu/timjenkinson

European Corporate Governance Institute (ECGI)

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HOME PAGE: http://www.ecgi.org

Steven Neil Kaplan

University of Chicago - Booth School of Business ( email )

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National Bureau of Economic Research (NBER)

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European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

University of Chicago - Polsky Center for Entrepreneurship

Chicago, IL 60637
United States

Ruediger Stucke

Warburg Pincus LLC ( email )

450 Lexington Ave
New York, NY 10017

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