From 2000 to 2012 debut funds delivered better median net IRRs in each year except 2004.
First-time funds have consistently outperformed vehicles run by established managers according to analysis by Preqin.
Preqin found that over the vintage years from 2000 to 2012 debut vehicles posted superior median net IRRs to all other funds in each year except 2004.
Some years have seen a large disparity in terms of the returns generated by first-time funds. Among 2002 vintage funds, for example, first-time funds saw a median net IRR of 16.9 per cent, compared to 10.8 per cent generated by successor funds.
Preqin’s analysis, which covered the whole private capital space, including private equity private equity, private debt, real estate, infrastructure and natural resources, is another sign that attitudes to first-time funds are changing and that performance persistence in private capital is not as apparent at it used to be. Investors have also warmed to first-time funds as the pressure to find attractive investment opportunities has increased.
A Preqin survey in June found that 51 per cent of investors would invest in a first-time fund, up from 39 per cent in 2013, while just 41 per cent of investors said they would not commit to firms raising their first ever fund, down by 15 per cent from 2013.
“Traditionally, first-time funds have faced difficulties when securing capital commitments from investors, due to the nature of traditional closed-end fund due diligence which often relies on track record, firm and investment history,” Preqin’s head of investor products Leopold Peavy said.
“However, as the marketplace becomes ever competitive investors are growing more willing to commit to managers setting out on their first fundraising process. Many investors have been rewarded for choosing this strategy.”
Written by Nicholas Neveling