Timing private markets - The pitfalls of predicting vintage performance

CIO MONTHLY | MAY

In this month’s letter, we look at the concept of a vintage year in private equity and venture capital funds and explain why diversifying across vintage years is important for investors. We also analyse the current environment for private market valuations and explain why it is important to stay true to strategic asset allocations and avoid timing the markets.


  • It is important to avoid timing the market and to diversify across vintage – or maintain vintage-year continuity over the long term. This is because a fund vintage can take multiple years to invest; fund vintages can perform contrary to expectations; and supply and demand can dry up in periods of market turmoil.
  • According to analysis from Hamilton Lane, on average, private market valuations are expensive and on par with record level multiples at 11.6x in the US and 10.8x in Europe. Sentiment across global fund managers suggests that pricing is unlikely to fall soon, owing to the market’s greater focus on ‘growthier’ assets and the continuation of favourable capital markets.
  • We advocate staying true to strategic asset allocations across asset classes. We continue to target strategic asset allocations in portfolios of 20% for alternatives (and up to 45% for endowment-style investors). Within that allocation, private markets (including private equity) are typically allocated 7-9%, while hedge funds and real assets share the remaining 5-7% each.
  • Understanding the theory and finding high-quality investment managers is arguably easier than implementation. This is because fund structures are generally better suited to large institutions than private clients. To address this, there are two routes an investor should consider. The first option is to invest in a diversified private market solution. The second option is to build a road map for your portfolio, which outlines where your private markets portfolio is today and where you want it to be. This can be more challenging than it sounds, which is why we typically recommend a combination of both evergreen and closed-end funds to ensure appropriate diversification and vintage continuity, whilst achieving target investment levels in the years ahead. Partnering with dedicated private markets specialists, such as Roc Partners (domestic) and Hamilton Lane (global), can greatly assist in developing and implementing that roadmap.