Small Private Equity Funds (Under $1Bn) Outperform Large Private Equity Funds (Above $1Bn)

Over the next several posts we’ll be digging into why smaller private equity funds (below $1 billion in a single fund’s size) outperform funds larger than $1 billion.

The data comes from a Q2 2024 Pitchbook report showing performance data through 9/30/2023 for U.S. Buyout funds with vintages between 2000 to 2018 (n = 535 funds). * (see endnote on data below)

The data looked at funds across two key dimensions:

• Fund Size:

  • Small = Below $1 Billion in Fund Size

  • Large = Above $1 Billion in Fund Size

• Emerging vs. Established Manager:

  • PE GPs with 3 or less funds = Emerging

  • PE GPs with 4 or more funds = Established

The data shows a few key points:

• Top Quartile and Top Decile Performers

  • Fund size is the key differentiator

  • Smaller funds outperform larger funds

  • Both Small x Emerging and Small x Established funds below $1 billion in size outperformed large funds (emerging and established)

• Bottom Quartile Performers

  • The Bottom quartile for each category was fairly consistent in under performance regardless of fund size or manager experience

  • Large x Established funds performed slightly better than other fund categories

• Bottom Decile Performers

  • In the bottom decile, large funds performed slightly better than small funds

*A note on the data:

By the way… Pitchbook data is not perfect. In our experience, it generally captures the GPs with Limited Partners who need to publicly disclose their investment performance (e.g. Pension Funds).

Some of the smaller and/or emerging managers that a nimble, sophisticated family office will back in the early years may not be captured in the Pitchbook dataset… especially if pension funds are not as likely to back a Fund I or Fund II from a GP.

At Gather Capital, we focus on curating world class investment opportunities spanning including:

• multi-billion dollar sized funds from blue-chip firms with multi-decade track records of top tier returns…

• …to sub-billion dollar sized funds led by highly sought after emerging managers.

If you’re interested in learning more about what we do, feel free to:

• swing by our website & create an account (if you haven’t already)

• grab some time on our calendar here

• shoot us an email

We’re looking forward to Talking Shop with you soon.

Sincerely,