PitchBook Analyst Note: First-Time PE Funds Overview

The prevailing narrative for first-time private equity funds is one of outperformance, but PitchBook data presents a more nuanced picture. First-time funds do not deliver statistically significant outperformance using cash multiples compared to non-first-time funds, even when compensating for size differences. When comparing IRRs, first-time funds sometimes underperform. However, the data also shows that first-time funds deliver outsized returns more frequently, deliver poor returns less frequently, and return capital more quickly.

In recent years, first-time fundraising has held steady as a proportion of PE fundraising overall, including in 2020. Tailwinds in booming sectors such as technology and healthcare may have partially offset the COVID-19 headwinds. Finally, although raising a first-time fund is a difficult and labor-intensive process for both LPs and GPs, the playbook for first-time fund managers has expanded.