Data Sources

Data sources are a particular topic of interest for private markets: there is no comprehensive database of activity and performance of private equity funds. Practitioners and academic writers access various complementary or competing sources, some of which are restricted and some are accessible to a larger public. Table 1 provides an in-depth perspective on the mosaic of sources available.

Databases with a restricted access are often provided to academic writers by fund investors or built by academic institutions (such as the Private Capital Research Institute1). We could access one of these sources for this book, provided by StepStone2, a fund investor (see below). We are very grateful for this opportunity.

Databases accessible to the public can be sorted into two categories: bottom-up and top-down sources. Bottom-up databases rely on different sources of variable to low quality from voluntary disclosures by fund investors and fund managers, public information, and disclosures under the US Freedom of Information Act (FOIA) in the US. They usually lack historical depth, as they usually start at best from the mid-1990s. The geographical coverage is also uneven and difficult to assess in its representativeness. The advantage of these databases is that providers such as Preqin3 and Pitchbook4 provide full access to the data, down to single individual funds or investments. We have used the Preqin database for statistics of activity and to assess our own statistics on fund performance.

Top-down databases deliver an aggregate access to the underlying data, often collected directly at the source from fund investors and fund managers. These are essentially fund performance data. eFront Insight, Cambridge Associates, and Burgiss collect data about private market funds and aggregate them so that they are anonymized. Data is aggregated according to the year of the creation of funds (their "vintage year"). Data is homogeneous, of good quality, and delivers a good perspective on the cash flows and valuations of funds. For this book, we have had access to the data of Cambridge Associates and eFront Pevara (now Insight, see below). We are very grateful to eFront for having granted us access to this data.

Therefore our sources combine high quality sources from eFront, StepStone, and Cambridge Associated (through Thomson Reuters Eikon, now Refinitiv). These data sources are further detailed below.

EFRONT INSIGHT

The eFront Insight database is generally considered as one of the most accurate and reliable sources of performance benchmark data in private markets. This database has been developed by eFront, a leading software provider specializing in alternative investments since 1999. Benchmarks based on the Insight database can be produced through eFront's software online. This software provides analytical tools supporting investors so they can make informed decisions, by quickly and easily benchmarking the performance of a portfolio, identifying market trends, and performing due diligence on potential investments.

This database contains information on more than 4000 funds, including the underlying cash flows. The source of the information is the data contribution of a wide variety of investors across the globe, including pension funds, funds-of-funds, and insurance companies, among others. The broad range of contributors makes the database diverse in terms of geographical coverage, investment strategies, and vintage, which in turn reduces the risk of bias. In terms of composition:

• North America and Europe account for 85% of the information contained in the database;
• Strategies include a wide range of private market strategies, from private equity (such as leveraged buyout, and venture capital), private debt (such as mezzanine and distressed debt), private real assets (private real estate, infrastructure, and natural resources), as well as secondary and funds-of-funds; and
• Vintages are rather well represented in the database from 1991 to date.

This data is sourced directly from the middle and back office software of the investors. Data (including data points on capital calls, distributions, net asset values, etc.) is collected directly from limited partners on a quarterly basis. Contributors provide data that is both anonymized and normalized, spanning from inception to date.

This data is cross-checked by eFront, thus guaranteeing the high quality and reliability of the aggregated data. Data consistency and reliability are ensured by a comprehensive series of manual and automated validation checks, run by a dedicated team of data specialists. These quality checks aim to:

• Identify inconsistencies in historical values or fund attributes;
• Detect gaps in data, duplicates, or null values;
• Identify cash flow issues;
• Neutralize currency effects; and
• Validate complete cash flow extraction by looking into PICC, DPI, and TVPI ratios.

STEPSTONE

StepStone is a global private markets investment firm focused on providing customized investment solutions and advisory and data services to its clients. Its clients include some of the world's largest public and private defined benefit and defined contribution pension funds, sovereign wealth funds and insurance companies, as well as prominent endowments, foundations, family offices and private wealth clients, which include high-net-worth and mass affluent individuals. StepStone partners with its clients to develop and build private markets portfolios designed to meet their specific objectives across the private equity, infrastructure, private debt and real estate asset classes.

StepStone Private Markets Intelligence (SPI), the firm's proprietary analytics platform, has gathered performance data on more than 10,000 investment managers and 26,000 private market funds. StepStone has accumulated through its research and due diligence activities performance data and cash flows on more than 65,000 private investments.

We have had access to its private debt loan database, which includes 124,000 tranches with up to 170 single characteristics. The cash flows are a generic replication of average private debts of different vintage years. Included in the construction are funds with a target size of 40-50 loans, where loans can be associated to a unique fund. After evaluating the database, 23 funds comprising approximately 1,000 loans were analyzed. Assumptions to replicate cash flows were5:

• 1.25% management fees and 15% carried interest over a 6% hurdle rate;
• Loans contributed to 90% of the fund sizes;
• Loans are drawn at launch and repaid at realization date;
• Coupons are paid assuming a gross yield equal to the internal rate of return; and
• The currency of reference is the USD.

CAMBRIDGE ASSOCIATES VIA THOMSON EIKON (NOW REFINITIV)

We also used the data from the consultant Cambridge Associates, accessed through Thomson Eikon (now Refinitiv). The data dates back to the 1970s and is one of the most established to date, covering private equity, some private debt (mezzanine and distressed debt), and private real asset strategies. Data is sourced directly from the middle and back office systems of investors, as well as in the due diligence process undertaken by Cambridge Associates when advising investors on their private market investments. Data is generally considered of high quality and reliable. Cambridge Associates declares capturing roughly 7,200 funds representing $4.6 trillion of capital across all asset classes.

Table 1 Sources and categories of information in private markets

Source: Authors, based on public information, private discussions, and correspondence. As of December 2018. For clarity, we did not include data from national/local professional associations.