IRR and Quartile ‘Distortions’

Professor Oliver Gottschalg, a leading academic on the performance of the private equity asset class, explains:

• How the standard math of IRR calculation can distort a track record as either unfairly positive or negative
• Why these distortions place an alarming percentage of GPs in the wrong quartile
• Why industrial cycles must be taken into account when assessing a GP team’s performance
• Why average fund-of-funds performance is ‘disappointing’