Key Takeaways
- • Cambridge Associates, according to PEI Secondaries Investor, has unveiled a new private equity benchmarking method, arguing that the traditional vintage-year, net IRR approach is no longer sufficient given the wide variation in fees, strategies and fund structures.
- • The advisory firm's new approach uses investment-level comparisons that show a fund's specific investment performance on a gross-of-returns basis, according to publisher context.
- • The shift addresses a lack of consensus among large LPs on how private equity performance should be measured, with benchmarking methods varying widely across the industry.
- • Cambridge Associates' benchmarks cover more than 2,300 fund managers and 9,000+ funds, and the firm's Private Investment Benchmarks are widely adopted by investors and managers.
Summary
Cambridge Associates has unveiled a new method for benchmarking private equity performance, according to PEI Secondaries Investor. The advisory firm said that private equity funds now feature many variations in fees, strategies and other structural features, which make the traditional vintage-year, net internal rate of return (IRR) benchmarking approach no longer sufficient for meaningful comparison.
According to publisher context drawn from Cambridge Associates' own materials, the new methodology relies on a dataset that captures investment-level comparisons. These comparisons are designed to show a fund's specific investment performance on a gross-of-returns basis, allowing investors to contextualize results at a more granular level than fund-level net figures permit. The firm's Private Investment Benchmarks are described as widely adopted by investors and managers, offering representative and comprehensive coverage of private capital markets.
The move reflects broader industry debate over measurement standards. Publisher commentary notes that the wide range of methods used by the world's largest limited partners indicates the industry has yet to reach consensus on how private equity performance should be measured. Performance reporting has also been a point of divergence, as private equity benchmarks are typically reported as IRRs while pension fund private equity investments are often reported as time-weighted returns.
Cambridge Associates' benchmarking backbone covers more than 2,300 fund managers and over 9,000 funds, according to the firm's publisher materials. Integration partners such as Chronograph have also incorporated Cambridge Associates Private Investment Benchmarks to help limited partners better contextualize fund performance. The full PEI Secondaries Investor article is available to registered readers, and further details of the new methodology's implementation were not available in the source material.
According to publisher context drawn from Cambridge Associates' own materials, the new methodology relies on a dataset that captures investment-level comparisons. These comparisons are designed to show a fund's specific investment performance on a gross-of-returns basis, allowing investors to contextualize results at a more granular level than fund-level net figures permit. The firm's Private Investment Benchmarks are described as widely adopted by investors and managers, offering representative and comprehensive coverage of private capital markets.
The move reflects broader industry debate over measurement standards. Publisher commentary notes that the wide range of methods used by the world's largest limited partners indicates the industry has yet to reach consensus on how private equity performance should be measured. Performance reporting has also been a point of divergence, as private equity benchmarks are typically reported as IRRs while pension fund private equity investments are often reported as time-weighted returns.
Cambridge Associates' benchmarking backbone covers more than 2,300 fund managers and over 9,000 funds, according to the firm's publisher materials. Integration partners such as Chronograph have also incorporated Cambridge Associates Private Investment Benchmarks to help limited partners better contextualize fund performance. The full PEI Secondaries Investor article is available to registered readers, and further details of the new methodology's implementation were not available in the source material.
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