What this module covers
In public markets an index fund returns roughly what the market returns, and the choice of manager matters little. In private markets the spread of outcomes between managers is wide, so the assessment of the manager carries much of the weight of any commitment. This module describes how that assessment is commonly made:
- reading a track record in context, and the two headline measures, IRR and MOIC;
- the questions behind the headline numbers;
- the team, its continuity and its dependence on individuals;
- the general partner's own commitment to the fund;
- the terms that align the manager's incentives with the investors'.
A worked example shows why the two return measures are read together.
A fund is a team
The team that runs a fund makes every decision: what to buy, what to pay, how to improve it and when to sell. A commitment to a fund is a commitment to that team's judgment, expertise and integrity for the life of the fund. A strong strategy in the hands of a weak team tends to produce weak results; a sound strategy in the hands of an exceptional team can produce exceptional ones. Assessing a manager is, in large part, assessing people.