hard · Private Equity pe-core
An LP is evaluating two 2018 vintage funds. Fund A has an IRR of 22% and a MoIC of 2.5x. Fund B has an IRR of 18% and a MoIC of 2.2x. During this period, the S&P 500 returned a 14% IRR.
Using the Kaplan-Schoar PME framework, if Fund A called all capital at an index level of 2,500 and distributed at 4,000, while Fund B called at 2,500 and distributed at 3,200, which fund delivered superior public market outperformance?
- Both are equal, as they both exceeded the benchmark IRR of 14%.
- Fund B, because its KS-PME is 1.72 versus Fund A's 1.56.
- Fund A, because its absolute MoIC (2.5x) and IRR (22%) are both higher than Fund B.
- Fund A, because its KS-PME is 2.14 versus Fund B's 1.98.
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