has persistence persisted in private equity evidence from.pdf

Preliminary Has Persistence Persisted in Private Equity? Evidence From Buyout and Venture Capital Funds Robert S. Harris*, Tim Jenkinson,** Steven N. Kaplan*** and Ruediger Stucke**** This Draft: April 2013 Abstract The conventional wisdom for investors in private equity funds is to invest in partnerships that have performed well in the past, so-called top quartile funds. This conventional wisdom is based on the belief that performance in private equity persists across funds for the same partnership. We present new evidence on the persistence of U.S. private equity (buyout and venture capital) funds using a new research-quality dataset from Burgiss, sourced from over 200 institutional investors. Using detailed cash-flow data for funds, we study the persistence of buyout and venture capital fund performance of the same general partners across different funds. We pay particular attention to persistence pre- and post-2000. Previous research, studying largely pre-2000 data, has found strong persistence for both buyout and venture capital firms. We confirm the previous findings on persistence in pre-2000 funds. There is significant persistence for buyout funds and, particularly for venture funds. Post-2000, we find mixed evidence of persistence in buyout funds. When funds are sorted by the quartile of performance of their previous funds, performance of the current fund is statistically indistinguishable regardless of quartile. Returns for partnerships in all previous fund quartiles, including the bottom, exceed those of public markets as measured by the SP 500. At the same t