Private Capital Benchmarks for Fund Managers

In this lesson, we'll cover how and why fund managers use private capital benchmarks.  

Fundraising and investor relations

Fund managers use private capital benchmarks to identify investors who are searching for similar investment opportunities, or those that have invested in similar opportunities in the past. These opportunities could be defined by region, industry, or strategy.  

Benchmarking also enables fund managers to understand new investor searches and mandates, so they can identify trends and stay ahead in a notoriously fast-moving market.  

Granular investor profiles provide fund managers with key intelligence on asset class activity, active mandates, past commitments to similar funds, and allocation breakdown.  

When pitching to investors, fund managers can use private capital benchmarks to demonstrate fund outperformance relative to peers. They can also use horizon IRR or quarterly indices to showcase fund outperformance relative to the wider asset class, or a public market equivalent.  

Access to comprehensive benchmarks is also essential for general partners (GPs) reporting to limited partners (LPs) on performance. They will use a benchmark to effectively report on performance so they can best position themselves for future funds. Transparency and accuracy are key to building trust between investors and fund managers.  

Capital deployment and deal sourcing

Benchmarks also serve as a key tool when sourcing and evaluating private companies. For example, fund managers use private capital benchmarks to find businesses that align with their early due diligence criteria. These benchmarks contain useful data on financials, valuations, ownership structures, and returns – as well as ESG risk and impact scores. 

Mid-office valuations

Unlike public companies, private companies are not required to publicly disclose their financial data. This makes valuation data difficult to obtain and presents a challenge for conducting accurate valuation analysis. Asset-level performance data and benchmarks help fund managers accurately assess the value and potential return of a company. 

With up-to-date asset-level performance benchmarks, fund managers can conduct data-driven and comprehensive valuation analysis. This can help them to build unbiased valuation policies based on market conditions and ensure compliance with industry guidelines. Managers can also use the data to back up their valuation assumptions for their portfolio companies and drive more informed negotiations with investors.  

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