Everything You Want To Know About Investment Multiples

by knguyenbison

Investors evaluating a private equity fund initially ask for two data points: “What are the fund’s multiple and IRR?” While the two measures tell a more complete story when evaluated together, we are going to focus on the fund’s multiple in this post. Importantly, we are going to talk about a number of different multiples and how they relate to a funds performance.

Making sense of PMEs

by Michael Roth

The private equity industry has always had its own way of measuring performance. Unlike a mutual fund, investors are committing to a blind pool of capital where GPs have discretion over the timing of inflows and outflows. This is why there is a difference in how you measure performance between a private equity fund and an equity mutual fund. Analyzing multiples of invested capital and IRRs – as opposed to a time weighted rate of return on public markets – allows investors to analyze a fund’s performance relative to its peers. However, if you are looking to compare a private equity fund’s performance to the public markets, you need to calculate a public market equivalent (“PME”) return measure. There are five main PME methodologies:

The New Way to Benchmark Private Equity

by goksor

Let us assume for a minute that performance persistence in private equity and venture capital is real.  This begs the question: how do I measure performance and how do I pick winners?

Are Quarterly VC Returns Even Worth Celebrating?

by Michael Roth

Venture Capital is an asset class characterized by a longer time horizon as startups are nurtured from idea to business model to successful (and maybe even profitable!) business. While buyout funds typically look to exit a company in three to five years, venture funds tend to take a little longer for their portfolios to develop.

With this in mind, it is a little curious to see the National Venture Capital Association (“NVCA”) joyously announce that VC returns saw a dramatic increase in Q4 2013. Heck, they even outperformed the public markets! The VC returns were largely driven by early stage funds who saw 14% quarterly returns in Q4 2013. Bison believes the VC funds below are the primary contributors to these strong returns.