PitchBook News - Ranking investor performance

The fund earning an 18.0% IRR just ekes into the top quartile, earning an equivalent label as the funds out-earning it by 600-700 basis points. Moreover, there are several funds that barely missed the 17.9% cutoff point to be considered "top quartile." They are resigned to a second tier, despite being much closer to the 18.0% performer than that fund is to the best of the top quartile.

In other words, the dispersion of returns should be an important consideration when determining a GP's track record. Not only that but how do you compare manager track records for multiple funds all at once?

Simply taking the average quartile ranking across multiple funds compounds the problem of ignoring dispersion. Taken together, our Manager Performance Scoring framework seeks to alleviate the limitations of quartiling.

Our Scores have several unique advantages:

Interpretability: The Scores represent the degree to which a fund family has outperformed or underperformed the benchmark, whereas quartiles have limited interpretability.

Incorporated uncertainty: The Scores take into consideration the uncertainty of each fund's current IRR figure. The uncertainty is a function of how much LPs have received in distributions, the fund's age, and a mean reversion term based on the extent to which a fund's IRR is an outlier relative to its benchmark.

Performance aggregation: Scoring fund families allows for quick digestion of the aggregate performance.

Comparability: The Scores are comparable across families even with track records made up of different vintage years and numbers of predecessor funds.

Transparency: All underlying fund performance data is available to PitchBook clients on our Platform.

To highlight the use cases, we've launched our inaugural rankings to present the top fund families across 10 select strategies based on our data-driven track record analysis.

To see the rankings and learn more about our methodology, please download the Global Manager Performance Score League Tables.

As always, please reach out if you have any questions or feedback.