Private Benchmarking for Private Equity Funds

Abstract

Private equity (PE) funds, or more broadly private capital funds, can be benchmarked against public or private alternatives. Academic literature usually focuses exclusively on the public side. In this article, the authors investigate more-rigorous private peer group benchmarking methods beyond traditional “quartile ranking.” They focus mainly on both statistical and deterministic models for (1) peer group data enhancement, (2) handling very small peer groups, (3) simulation-based portfolio aggregation, and (4) the notion of maximum diversified private benchmarks. Ultimately, they discuss obtaining more-meaningful private benchmarks for a private capital portfolio.