PitchBook News - How to benchmark well

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The Research Pitch

January 4, 2025

PE First Looks: 2024 PE data is here! Get early access to the key top-line metrics (Global, US, and Europe) that will power our upcoming annual reports. See the data.

December performance: US equities declined in the last month of 2024, but overall it was a banner year for returns. Our Global Markets Snapshot breaks down a month of trends across many indexes and sectors. Read it here.

More data: A new year means new updates across our suite of dashboards. Check out the latest on our Private Capital Return Barometers, VC Dealmaking Indicator, Unicorns Tracker, and much more.

Everything you need to know about proper benchmarking

The following is a lightly edited excerpt from our research note: Numbers Mean Nothing Without Benchmarking.

Investment portfolio management involves the use and reporting of numbers. Countless numbers.

But what do they mean? Are they good or bad? How do they relate to decisions made and the evaluation of those decisions?

Experienced and amateur investors alike struggle with the measurement, reporting, and interpretation of fund returns. Even when an investor thinks they have a handle on it, some stakeholder will ask a question that leads to another angle not yet fully considered.

Our new research note offers a primer for those who want a better understanding of how investment performance is calculated, what benchmarking entails, why certain investment decisions and products require different types of benchmarks, and how investors should put that performance into the appropriate context.

We address the evaluation of different levels of allocator decision-making, the benchmarking challenges of the "traditional" private equity fund structure, and the issues around comparing or combining different kinds of returns.

The movement to democratize alternatives means that there are many new investors who will not intuitively recognize that the benchmarks they are used to using, like the S&P 500, do not make sense in all cases in evaluating how their portfolio is doing.

Even their advisors may be only vaguely aware that a private fund IRR is not appropriately compared to the time-weighted return of a public index, but they may not know why private funds get different performance calculations, what is so different about the calculations, or why a higher number may not always be better than a lower one.

In our guide, we delve into many aspects of investment benchmarking to contextualize these and other issues. We address not only specific benchmarks, but also why some are suitable for some purposes and not for others, why they are sometimes not comparable to other benchmarks, and the difficulties of creating benchmarks at all in the private markets.

Overriding this is the determination of which sorts of benchmarks make sense for what decisions get made when assembling a portfolio—asset allocation decisions should be measured differently than private equity portfolio decisions, which in turn should be measured differently from the returns of individual fund managers or their underlying holdings.

Every aspect should be measured, but how it is measured depends on the decision and the assets involved.

Download the free research note: Numbers Mean Nothing Without Benchmarking

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Thematic Research

H2 2024 VC Tech Survey

We surveyed 53 venture capital investors toward the end of 2024 on a variety of topics, including the AI boom, deep tech trends, and fundraising expectations.

Click to access all of the survey-driven insights.

How are deal terms and areas of investment focus changing in today's landscape?

Which sectors are oversaturated? Which are underhyped?

Read the free research

Webinars & Events

A lot of opportunities to hear from our team:

Jan. 15: Our credit analysts will dissect the pressing trends in the US syndicated loan, private credit, and CLO markets. We'll also spotlight leveraged loan payment defaults and distressed exchanges. Register here.

Jan. 16: We're hosting a live event to recap all the biggest announcements, emerging trends, and companies to watch on the last day of the 2025 J.P. Morgan Healthcare Conference. Register here.

Jan. 22: Join us as our US PE analysts examine the key themes that defined 2024 and what will drive the year to come. Topics include PE performance trends and our predictions for M&A, IPOs, and more. Register here.

Jan. 23: Our London-based team will recap the year that was for EMEA private capital and present their outlooks for 2025. Learn about how these markets are faring—plus how they're positioned for the future. Register here.

Jan. 29: Join us in New York for PitchBook's Private Equity Breakfast Briefing! Our PE analysts will share their insights followed by a panel discussion with industry experts. We'll have networking time, too. Register here.

In the News

Our insights and data featured in the press:

• The number of active VC investors has dropped more than a quarter from 2021's peak. [FT]

• 2024 marked a year of recovery for PE. [Inc.]

• Discussing which crypto projects could get the most venture funding in 2025. [CNBC Crypto World]

• The largest VC-backed companies are staying private for longer, but the vast majority of companies don't have that option. [Bloomberg]

• Phase 2 trial data will continue to be key when it comes to VC and biopharma in 2025. [Fierce Biotech]

If you're a journalist interested in interviewing our analysts or requesting data, contact our PR team.

ICYMI

More of our recent research (* - report preview):

2025 Outlooks

• US Private Equity Outlook
• US Venture Capital Outlook
• Industrial Technology Outlook
• Consumer Technology Outlook
• Enterprise Technology Outlook
• Healthcare & Life Sciences Outlook
• EMEA Private Capital Outlook
• APAC Private Capital Outlook

Thematic research

• GP-Led Secondaries
• Diagnostics in the Next Decade
• Climate Tech Software
• Battery Swapping*

Industry & tech research

• Emerging Tech Indicator
• E-Commerce Report*
• Supply Chain Tech Overview*
• Digital Health Report*
• Pharmatech Report*

Coming next week (subject to change)

• PitchBook-NVCA Venture Monitor: First Look
• PitchBook Benchmarks
• Vertical Snapshot: Legal Tech
• Emerging Space Brief: Warehouse Robotics
• AI Healthcare & Life Sciences Market Snapshot

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PitchBook News - How to benchmark well

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