London, 2nd October 2014 – Pantheon, a leading global private equity investor, today reported results from a quantitative study revealing that funds which distributed more cash than their vintage peers during the first few years of their commitment period were more likely to be top quartile performers over the long term.
“This research study, available by clicking here, has provided some exciting and, in our opinion, innovative and original insights into the characteristics displayed by private equity funds. We think investors in the asset class will find these results revealing and, in some cases, surprising”, said Nik Morandi, Partner and Head of Research and Portfolio Strategy at Pantheon.
Titled “Private Equity Cash Flows and Performance Patterns,” the findings from Pantheon’s study, suggest that certain cash flow characteristics, some of which can be identified as early as the third year in the life of a private equity fund, have historically been associated with final fund quartile rankings in a statistically significant way. Based on Pantheon’s analysis, some of the key findings were that:
- Funds that generated a higher rate of early distributions compared to vintage peers were more likely to be top quartile performers over the longer term
- A deep J-curve, relative to vintage peers, signalled a significantly higher probability that a fund would be bottom rather than top quartile
- There was, notably, no evidence to suggest that funds which called capital more quickly were more likely to outperform vintage peers, contradicting assumptions that a fast pace of investor drawdowns is linked to stronger performance
- The findings of the study can provide additional supporting information for an investor looking to manage out underperforming components of a private equity portfolio, and consider doing so at an earlier stage, before that underperformance is fully crystallized
About the study
Pantheon’s research study was conducted by Pantheon’s dedicated research and investment teams. The study focused on data for 322 US buyout funds with vintage dates between 1992 and 2007, based on fund performance data up to and including Q2 2013.
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Notes To Editors
Pantheon is a leading global private equity fund investor that invests on behalf of over 400 institutional investors, including public and private pension plans, insurance companies, endowments and foundations. Established over 30 years ago, Pantheon has developed a strong reputation and track record* in primary and secondary private asset solutions across all stages and geographies. Our investment solutions include customized separate account programmes, regional primary fund programmes, secondaries, co-investment and infrastructure programmes.
As of March 31, 2014, Pantheon had over $30.5 billion assets under management** and we currently have 198 employees, including 74 investment professionals, located across offices in London, San Francisco, New York, Hong Kong, Seoul and Bogotá.
Earlier this month, Pantheon was ranked first among the largest and most influential investors in Europe by Dow Jones’ Private Equity News. Pantheon took first place among Europe’s top 25 private equity investors in this annual compilation. The compilation takes into consideration feedback from some of the private equity industry’s most well-respected chief executives, placement agents and investor relations executives as well as data from Preqin.
* Past performance is not indicative of future results. Future performance is not guaranteed, and loss of principal may occur. The results of this study are not intended to be, and should not be perceived as, a belief that Pantheon can project or predict potential fund or manager performance or potentially forecast investment results.
** This figure includes assets subject to discretionary or non-discretionary management, advice or those limited to a reporting function.
For more information, please visit www.pantheon.com.
Amanda McCrystal, Head of Global Marketing and Communications
Tel: +44 207 484 6200