Background on Cambridge Associates Private Investment Benchmarks
For over 50 years, Cambridge Associates has worked with endowments, foundations, family offices, pensions and other institutional investors to build and align portfolios to investors' goals. Cambridge Associates was an early proponent of private investing. Due to its deep understanding of datasets across private market asset classes, strategies and geographies, it remains a critical proponent and advisor in the private market landscape. Over decades of advising investors and working with private market fund managers, Cambridge Associates has developed a platform that tracks over 98,000 investments, 10,000 private investment funds and over 15,000 operating metrics, and it maintains over 6,600 General Partner (GP) relationships.
Cambridge Associates initially built private market benchmarks for their institutional investor clients’ private portfolios. It still uses its benchmarks to advise its institutional clients on their private market exposures; however, the number of investments and strategies that comprise the benchmarks has grown drastically with the growth in the underlying markets. The benchmarks follow a rules-based approach and are constructed with clearly defined classifications established by Cambridge Associates.
Benchmarking Private Markets
Private markets are among the fastest-growing but most opaque market segments. There’s also a high degree of return dispersion, making benchmarking private markets more nuanced than public markets. Return measures at different points of the performance curve become critical for determining whether a fund manager is outperforming. Some critical differences in benchmarking private markets relative to public markets are disclosure requirements, financial statement reporting frequency and the impact fund managers play in the investment cycle (e.g., the timing of cashflows). Accurate benchmarking for private investments requires a diligent and thorough process and access to a “golden source” of performance data. In private markets, that golden source is fund financial statements.
Data Sourcing Is Key
Cambridge Associates sources its data directly from private investment fund managers. The managers contribute their data to the anonymous benchmark sample across all strategies and geographies. Contributing managers are screened to ensure the data is of institutional quality, meaning it’s comprised of funds that are a viable opportunity for institutional investors, such as endowments and foundations, public pension and sovereign wealth funds, and large private family offices. This process differs from a private market benchmark built from public sources, which often rely on data collected through Freedom of Information Act (FOIA) requests or publicly available data. This can impact the accuracy and timeliness of the data.
The Cambridge Associates private investment benchmarking universe is broad and granular, reflecting the diverse opportunity set in private markets. Its standard benchmarks are organized intuitively into four main strategies: Private Equity, Venture Capital, Private Credit and Real Assets. Cambridge Associates also generates aggregated benchmarks that blend Private Equity and Venture Capital. Within these broad categories are carve-outs, including Buyouts, Growth Equity, Subordinated Capital, Distressed Debt, Infrastructure, Real Estate, Secondaries and Fund of Funds. The categories can further be broken down by geography, size or sector.
