Financial Education

Benchmarking the returns of private equity investments is complicated by the fact that events that would indicate a change in market value (such as a new financing, acquisition, IPO, or failure of the business) occur infrequently.

Cambridge Associates and Thomson Venture Economics provide overall indices for VC and buyout funds. They typically calculate the internal rate of return based on cash flows since fund inception. Often firms are compared by vintage year for comparability across the stage of financing and any macroeconomic influences.

Since the venture capital must provide appraisals of some assets, stale valuations can result in a smoother return appearance than is actually realized.

For more information, see all articles on: Active Management, Alternative Assets, Institutional Investing, Investing in Private Equity, Investment Returns, Portfolio Management

See also:

Investments in Private Equity

The Role of Private Equity Investments in a Portfolio

The Structure of Private Equity Funds

Benchmarks for Investments in Real Estate

Types of Alternative Investments