The Real Drivers of Private Market Performance

Private equity markets have long operated with limited transparency. Returns are reported intermittently, benchmarks vary widely and making sense of performance drivers has often relied more on judgment than precision.

Yet, as institutional allocations grow and increased access through retirement plans bring greater fiduciary scrutiny, this opacity is being challenged, pushing private markets to increase transparency and break down what’s behind performance. 

Investors want to understand exactly how outcomes have been achieved, and how market timing, allocation decisions or manager skill made the difference.

“Private equity can be a highly effective asset class, but outcomes vary widely,” says Sofia Gertsberg, who leads HarbourVest’s Quantitative Investment Science (QIS) team. “With allocations increasing, investors need a more systematic way to pinpoint where returns are coming from and whether they are repeatable.”

In response, more rigorous, data-driven approaches are becoming core to how private-equity investors analyze performance. HarbourVest, a global private equity investment firm, has spent nearly a decade building its QIS team, backed by over 40 years of proprietary data. 

Using large-scale datasets and quantitative modeling techniques — refined over decades by public market managers — QIS generates granular insights into how value is created across portfolios, and the role investment managers play in driving those returns.

Decoding exactly what’s behind fund performance

Interpreting private equity performance has become increasingly complex in recent years. Data from Bloomberg’s Private Equity & Venture Annual Report 2025 highlights a wide dispersion in outcomes across funds, with results varying significantly among comparable strategies. For example, among the highest-raising buyout funds in 2022, internal rates of return (IRR) ranged from -6.6% to 30%. This level of variability underscores the importance of understanding the drivers of returns beyond the headline performance metrics alone.

At the same time, cash distributions have remained limited, leaving more value on paper and making headline metrics harder to interpret. That, in turn, makes it more difficult to judge whether investors are being adequately compensated for reduced liquidity. HarbourVest’s QIS approach to portfolio benchmarking and performance attribution is designed to bring greater clarity to that trade-off.

Despite the complexity of assessing performance, the growing importance of private markets is clear, with Bloomberg Intelligence finding that the number of private companies valued at over $1 billion reached 1,582 in 2025, with no retreat in sight. In addition, transactions of unprecedented size are becoming more commonplace within private capital structures.

These developments underlie structural issues in how private equity is assessed. Gertsberg points to three persistent challenges in the asset class: limited transparency; inconsistent benchmarking; and an overreliance on headline metrics that can mask the actual drivers of performance. 

In practice, two portfolios with similar reported returns may have arrived there in very different ways — one through favorable market conditions, another through consistent execution.

To address these variations in how results are attained, Gertsberg’s team uses underlying investment-level data, rather than fund-level averages, to build custom benchmarks and assess outcomes on a like-for-like basis. That data is standardized across portfolios, allowing individual investments to be grouped by industry, timing and other deal characteristics, then benchmarked against market exposures that mirror the manager’s investment choices. 

“Once you go sector-by-sector, deal by deal, and normalize for things like sector and hold period, you can see whether performance is actually coming from the manager or from the market,” Gertsberg says. 

Measuring genuine outperformance versus market effects

The scale of data accessible to Gertsberg’s QIS team is a key enabler of this approach. HarbourVest has been investing in private markets for more than four decades, amassing a dataset that goes much deeper than just funds, spanning thousands of investments across managers, sectors, investment styles, sizes and geographies. 

Because of its multi-manager strategy — allocating capital across a wide range of funds —HarbourVest has visibility into a broader cross section of the market than a traditional private equity firm, whose view is typically limited to its own portfolio companies. This breadth supports more robust comparisons and a more detailed understanding of how performance is generated across private equity.

The company’s most recent benchmark report dives deep into the sectors driving results in the global private equity market. 

By exposing sector composition, these benchmarks provide a level of transparency and granularity that traditional fund-level data can’t match, says Gertsberg. 

Gertsberg says that it’s not just the depth of the firm’s data, but how that data is structured and analyzed that produces the firm’s actionable insights. Her team, comprised of investment professionals and data scientists, is embedded within HarbourVest’s investment function and works alongside deal teams to ensure that its QIS analysis feeds directly into decision-making. 

The team’s focus is on building quantitative models and investment tools that can be applied in practice, rather than producing analytics for reporting purposes. This helps investors move from simply observing outcomes to grasping how they’re actually achieved and equips them to leverage these insights in investment decision processes. 

The firm’s analysis also allows the assessment of manager performance on a deal-by-deal basis — showing exactly which returns reflect genuine outperformance versus broader market effects.

“We’re able to draw on decades of experience and apply quantitative methods to it,” Gertsberg says. “That practitioner lens is what makes the work actionable, rather than theoretical.”

Moving from returns to risk-adjusted outcomes 

The firm’s investment benchmarking frameworks can be extended beyond retrospective analysis. By simulating how portfolios might behave under different market conditions, investors can assess not only potential returns, but the amount and nature of risk required to generate them — moving beyond expected performance to evaluate the risk each portfolio is taking and compare outcomes on a genuinely risk-adjusted basis.

This forward-looking perspective brings risk into sharper focus, Gertsberg says. By quantifying how different exposures influence both potential returns and downside scenarios, it becomes easier for firms and investors to assess the trade-offs embedded in portfolio construction, rather than evaluating outcomes in isolation. 

“As private equity becomes more widely adopted and regulatory and fiduciary expectations evolve, the need for clearer, more transparent ways to evaluate both risk and return will only increase,” says Gertsberg. “This further raises the bar for how performance is measured and understood.”

HarbourVest Private Equity Benchmarks (“HV PE Benchmarks”). Market analysis is not representative of any HarbourVest product: The HV PE Benchmarks reflect a compilation of PE partnership and transactional data drawn from internal and external sources and related estimated valuations of such companies by HarbourVest for the illustrated period (which in turn are based on HarbourVest’s subjective assumptions). Returns are not representative of any HarbourVest fund, account, and are not representative of any HarbourVest investment experience. Returns are gross of management fees and carried interest. The HV PE Benchmarks data universe information has been developed internally based on information obtained from sources believed to be reliable; however, HarbourVest does not guarantee the accuracy, adequacy or completeness of such information or HarbourVest’s related valuation estimates or assumptions, which may be materially inaccurate. The HV PE Benchmarks are intended to be representative of the broader PE market and do not reflect any views, analysis, or recommendation by HarbourVest with respect to any particular investment and are not representative of the investment performance of any HarbourVest investment or the experience of any investor in any HarbourVest product. Past performance is not indicative of future results.

HarbourVest Partners, LLC (“HarbourVest”) is a registered investment adviser under the Investment Advisers Act of 1940. This material is solely for informational purposes and should not be viewed as a current or past recommendation or an offer to sell or the solicitation to buy securities or adopt any investment strategy.  The opinions expressed herein represent the current, good faith views of the author(s) at the time of publication, are not definitive investment advice, and should not be relied upon as such. This material has been developed internally and/or obtained from sources believed to be reliable; however, HarbourVest does not guarantee the accuracy, adequacy or completeness of such information. The information is subject to change without notice and HarbourVest has no obligation to update you. There is no assurance that any events or projections will occur, and outcomes may be significantly different than the opinions shown here. This information, including any projections concerning financial market performance, is based on current market conditions, which will fluctuate and may be superseded by subsequent market events or for other reasons.