Identify top-performing funds—first

By Jacob Wilder
July 19, 2018

It’s well accepted that top-performing funds generate outsized returns, but with so much competition, how do you get in front of top tier funds? More fund managers are entering the private markets—further increasing competition. In addition to more funds, this also means more fund flops, emphasizing the need to conduct greater due diligence. Further, investment timelines are continuing to expand—ballooning up from the traditional 10-12 years to as long as 15-18 years in some cases. To be successful, you have to stay informed—and more comprehensive data is the key to remaining competitive in such a crowded landscape.

How to get to top funds—first

With the right data, it’s possible to get in front of high quality opportunities—before your competitors do. Of course, the first thing to look at is fund-level details for managers with closed funds, so you can dig into their historical performance. Consider focusing on previous details involving investments, IRRs, deal multiples and liquidity events to see whether their next fund might give you the returns you’re looking for.

One way to beat your competition to high-performing GPs is to track fund managers that have minimal capital remaining in a fund, but have yet to announce an upcoming fund. If you can zero in on these sorts of opportunities, you can identify windows where your targets are looking for partnerships and you’re better suited to reach out—before the GP even opens another fund. Though it will still take a lot of work to dislodge any existing LP relationships, having insight into when a GP is looking for capital can help you get ahead of the competition.


At the right time If you can zero in on the right opportunities, you can identify windows where your targets are looking for partnerships—before the GP even opens another fund.

See where other LPs are finding success

To be more thorough in your due diligence, you may want to see where your competitors are finding success. Data that offers insight into LP transactions can help you keep your fingers on the pulse of the market and help you validate your investment strategy. If you have access to every deal your competitors have done, you can feel more confident in your own approach, or make tweaks to your allocation strategy based on their past returns.

Based on your research, you can decide whether it’s worth it to pursue the same fund next time around or if you might want to invest in similar funds. Plus, with visibility into LP activity, you can see where pensions, foundations, endowments and fund of funds are committing capital and see who’s most active in the asset classes you care about. Information on previous investors’ locations, commitments and recent deals can help you get the full picture. From there, you can check their return rates against other funds to test your hypotheses on allocation strategy.
 


The complete picture With more granular detail and a broader range of data, PitchBook Benchmarks better display how things really fit together in market.

Stay competitive by better assessing overall market performance

Getting a better sense of how various asset classes are performing on a relative basis can help you make more informed allocation decisions. A diverse set of benchmarks helps you identify and monitor which asset classes are generating outsized returns and which ones aren't—so you can better manage your allocation strategy and stay ahead of the competition.

Typically, benchmarks only provide you with aggregated data (mostly due to contractual restrictions). But, PitchBook Benchmarks (our standalone fund measurement performance tools) give you greater transparency into performance benchmarking. Having access to granular fund information based on underlying returns data (such as IRR, PMEs and cash multiples) provides a clearer picture of fund performance than traditional benchmarks—which could be critical in your asset allocation optimization and risk management.
 

With so many options, how do you find the right fund manager?

How to mitigate risk with the right private market data →



Learn more: The data institutional investors need to tap into private capital—while mitigating risk

 

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