Private equity characteristics and performance: An analysis of North American venture capital and buyout funds

Abstract

The paper investigates the relationship between fund performance and fund characteristics of North American private equity (PE) funds, by analyzing the interactions of fund size, fund sequence, and past fund performance on traditional fund return measures. The empirical evidence is based on both linear and polynomial regressions, on a sample of 345 venture capital (VC) and 411 buyout (BO) funds with vintage year over the period 1995–2010. We document a concave relationship between fund size and performance, persistence in PE performance, as well as a convex relationship between fund sequence and performance. We suggest both the optimal fund size and the optimal fund sequence number. Economic implications for investors and general partners are discussed as well.

Modelling Profitability of Private Equity: A Fractional Integration Approach

“…However, the relationship between fund performance and the sequence number of the fund is convex, although not significantly. Roggi et al (2019) obtained similar results: there is no fast increase in fund performance until a certain fund sequence is reached, and the marginal increase in the sequence number seems to produce positive effects on fund IRR and PME, even at a high sequence number (i.e., from a 4 to 5 sequence).…”