Standard metrics like internal rate of return (IRR) and total value to paid-in capital (TVPI) promise clarity but rarely deliver. Peer comparisons are distorted by small samples, noisy data, and inconsistent definitions. For LPs, that means one of the biggest risks isn’t the market itself, it’s misjudging whether they’re backing genuine talent or the benefits of a bull market. 

Scientific Infra & Private Assets (SIPA), an EDHEC venture, elevates private market benchmarking with robust, market-based indices that reveal true manage skill by measuring alpha. Rather than obscuring performance with quartiles and peer group comparisons, our approach magnifies what matters most, the ability to generate alpha. 

Why Peer Group Comparisons Fail and How Market Indices Reveal True Skill? 

The limitations of peer group benchmarks are well documented. They are often built on incomplete and inconsistent datasets that result in misleading comparisons that represent only a fraction of the true opportunity available. The quartile boundaries used to classify funds as “top quartile” or “bottom quartile” are particularly unreliable. Statistical analysis shows that with so few data points in most peer groups, the confidence intervals are so wide that almost all funds can be made to look better or worse than they really are. In practice, this means investors cannot rely on quartile rankings to guide their investments. 

Peer noise vs. market clarity: the privateMetrics approach 

SIPA’s answer is to shift the frame of reference. Rather than comparing funds with one another, we propose comparing them with the actual market for private companies and not the narrow slice captured by existing funds. This is the crux of the privateMetrics suite of indices. By constructing benchmarks that track the performance of the investable private market universe, we can provide investors with the tools to calculate Direct Alpha and measure whether a fund genuinely outperforms the market. 

Read the full ‘Thought Leadership’ article at the link below