Performance Attribution in Private Equity

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Because there is no investable index for private equity, and because TWRR is not equal to (or even reconcilable with) IRR in most cases, the current body of finance literature does not include a reliable method for performance attribution in the private markets. In this article, the author puts forward a new method and means for determining performance attribution int he private markets that addresses the lack of an investable index and incorporates the time/cash flow attributes of the IRR computation.

Author: Austin M. Long, III Alignment Capital Group

Because there is no investable index for private equity, and because TWRR is not equal to (or even reconcilable with) IRR in most cases, the current body of finance literature does not include a reliable method for performance attribution in the private markets. In this article, the author puts forward a new method and means for determining performance attribution int he private markets that addresses the lack of an investable index and incorporates the time/cash flow attributes of the IRR computation.

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