How to Benchmark Private Capital... and How Not to

In this paper we advance the discussion and describe a recommended approach for constructing a composite private capital benchmark, emphasizing the importance of pooled measures. In it, we also propose a methodology for computing portfolio ranks, which allows the generation of a report containing both pooled and rank measures at all levels of a reporting hierarchy.


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james kocis
Measuring Portfolio Diversification is Not Easy

In this research brief we explore the pitfalls in measuring portfolio diversification in private capital. To this end we examine two very different methodologies - temporal diversification and cross-sectional diversification - and discuss the shortcomings of each.

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james kocis
Commitment Pacing: Targeting a Fixed Valuation

In this paper we study a deceptively simple question: how to maintain (or start) a private capital program in such a way as to meet certain goals. For example, suppose one takes over management of a private capital portfolio at a large pension fund, and is tasked with maintaining a valuation of about $1B. At what rate should one commit capital to best achieve this goal?

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The Burgiss Team
Single-Period Brinson-Style Performance Attribution for Private Capital

Performance attribution is the process of decomposing a portfolio’s return into subcomponents that are each the result of the decisions that went into the construction of that portfolio. A portfolio is usually assigned a benchmark, and hence the return to be decomposed is its return relative to the benchmark — the active re-turn. If assets are grouped in some way (such as by vintage) then there are two classes of decisions that went into the construction of the portfolio…

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The Burgiss Team
Budgeting for Capital Calls: A VaR-Inspired Approach

The results in the first paper showed that contributions and uncalled capital, in addition to age, are a useful predictor of future cash flows. Additionally, we demonstrate that the approach outlined by Takahashi and Alexander underperforms our data-driven models. In this second paper, we deepen this examination, focusing our attention on budgeting for future capital calls.

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james kocis
Modeling Cash Flows for Private Capital Funds

In this paper we focus on predicting cash flows for private capital funds. We start by discussing the characteristics of cash-flow data that make these predictions challenging, and then examine several models for expected contributions and distributions, and evaluate their performance, both in-sample and out-of-sample.

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The Burgiss Team
Better Than The Buffet Bet?

A decade ago Warren Buffett bet that public equities would outperform hedge funds. In this month’s research brief, we revisit his bet, this time pitting private equity against public equity.

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james kocis
Endurance of Internal Rate of Return

Performance measurement of private capital investments has been an ongoing challenge for asset owners, asset managers, and investment consultants alike. Internal Rate of Return (IRR), despite its well known shortcomings, is widely used to measure the performance of private capital investments.

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The Burgiss Team
Inside Private Equity

Inside Private Equity (Wiley, 2009) was written for institutional investors to help provide a general understanding of how to invest in, monitor, and measure the performance and risk of private equity. Here, you’ll become familiar with everything from traditional industry measurements to a structured approach to portfolio management. 

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james kocis