Top quartile GPs struggle to reproduce success, study finds

Only about one in four top quartile managers can repeat that achievement in a successor fund, fresh research discovered.  

Preserving your status as a top-quartile manager in a follow-up fund appears to be a difficult feat, according to fresh research from the Oxford University Saïd Business School.

Using data on 285 buyout funds with predecessor funds the research found that for funds raised after 2000 top quartile fund managers are only 27.5 percent as likely to repeat that success.

However, for funds raised earlier the persistence of fund manager performance is higher – at around 38 percent.

“Buyout performance is not as persistent as you might think,”Oxford University's Tim Jenkinson said at the group's Private Equity Forum this week in Oxford, adding that the disappearing performance persistence could be associated with the industry becoming more mature and competitive.

“This experience advantage has disappeared in recent years. Across GPs, the probability that a GP will repeat top quartile performance is now no better than random,”Jenkinson's paper said.

Previous research from Jenkinson has also shown that GPs produce more predictable returns as they age. This could be because GPs become more cautious as they get older, wanting to avoid deals that could tarnish the reputation they have built over decades.