Generic Benchmarks Mislead LPs

Why it matters

Fund performance doesn’t happen in a vacuum. Macro conditions—interest rates, valuations, liquidity—shift drastically over time. A fund raised during a bull market faces a very different reality than one launched before a crash.

Without adjusting for that context, you risk praising mediocrity or punishing excellence.

The smarter benchmark: Vintage year

A vintage year groups funds that began investing around the same time. That means:

• Same economic backdrop
• Same credit environment
• Same deal flow and valuations

👉 Vintage benchmarking levels the playing field. It isolates manager performance from market luck.

Example: 12% IRR ≠ 12% IRR

Let’s say a GP reports a 12% net IRR. Is that good?

Depends:

• For a 2005 fund (median ~6.7%): ⭐ stellar
• For a 2015 fund (median ~15.5%): 👎 underwhelming

📌 Context turns the same number into two very different stories.

A tale of two vintages

Compare the 2005–2006 and 2015–2016 vintages:

2005–2006:

• Raised before the Global Financial Crisis
• Invested into peak valuations
• Hit by credit freeze and downturn
• Median net IRRs: ~7.7%
• Top quartile: ~11%
• Median TVPI: ~1.56×

2015–2016:

• Raised in a near-zero rate world
• Invested during a prolonged bull market
• Benefited from rising valuations, cheap debt, frothy IPO market
• Median net IRRs: mid-to-high teens
• Top quartile: >20%
• Median TVPI: ~2.0×

📉 Same industry, totally different conditions.

Why vintage benchmarking beats the average

Generic “all-time” metrics blur crucial distinctions:

• They mix crisis-era funds with bull market funds
• They confuse LPs about true outperformance
• They fail to reflect risk, timing, and economic headwinds

📊 Vintage benchmarks show whether a manager outperformed their peers under the same conditions.

What smart LPs do

Ask this every time: “Compared to what?”

When a GP shares performance metrics:

• Get the fund’s vintage year
• Compare IRR and TVPI to that cohort’s medians
• Use tools like FundFrame to access vintage-specific benchmarks

That’s how you avoid misleading comparisons—and spot real alpha.

The bottom line

All IRRs are not created equal. A strong return in 2006 could be weak in 2016. Don’t be fooled by top-line stats.

Vintage year benchmarking is the only way to measure skill—not just circumstance.

Just like with wine, in private equity: Vintage really does matter.