Private equity mega-funds (of at least $5 billion) have tended to outperform smaller funds over the past 20 years. That shouldn’t come as a surprise, as mega-funds are only raised by firms that have outperformed over time.
At least for private equity, the biggest firms are almost by definition some of the best firms, at least perception-wise, since they had to justify their growth to LPs over several funds. Not every top-performing firm opts to grow that large—but the ones that do go on to raise mega-funds give themselves good odds of maintaining performance as they grow.
Our recent PitchBook analyst note dives into performance metrics for $5 billion-plus PE funds and how they differ from the rest of the market. TVPI figures—which reflect a fund’s investment multiple—suggest that mega-funds hit more doubles than the rest of the market, but also fewer home runs. For example, across several vintage buckets, mega-funds have a higher chance than smaller-sized funds to achieve a TVPI of at least 1.5x. That’s great news for larger LPs looking for consistently positive returns.