Reliability of interim performance in private equity funds

We compared the interim and final realized internal rate of return for liquidated buyout funds (238) and venture capital funds (233) in the U.S. from 1985 to 2019. The results revealed that buyout funds' interim performance tends to be underestimated, while that of venture capital funds can be underestimated or overestimated, depending on the period and associated global events. Further, we found that private equity funds' interim performance is affected by fund performance, investment stage, and stock market performance. These results were robust to other performance measures. Our findings will assist private equity investors, policy makers, 2020 and regulators to better evaluate interim performance reliability based on fair value estimates.