Experience as a Performance Driver in Private Equity: An Empirical Analysis of Buyout and Venture Capital Funds

Sammanfattning

This thesis analyses the impact of a Private Equity firm's experience on fund performance. It draws on a manually extended data set from Preqin, consisting of 413 liquidated Buyout and Venture Capital funds from North America and Europe with Vintage years between 1980 and 2012. We break down firm experience into multiple variables based on organisational learning theory. We find that experience can be a reliable performance predictor, depending on the variable employed. The most significant, positive, and robust predictor is a firm's age. We also find that a higher number of deals in a top-quartile fund negatively affects the returns of the succeeding fund, which might be driven by overconfidence. Further, a prior fund's industry heterogeneity has a positive significant but not robust effect on the subsequent fund's returns. This thesis adds to the academic literature through its dedicated focus on experience and the joint analysis of multiple existing and newly employed experience proxies within one model.