Vintage Year
AdvancedVintage year is the year in which a private equity, venture capital or other private fund begins investing, or makes its first capital call, used to group funds for performance comparison.
Funds that start investing in the same year face similar economic conditions, valuations and opportunities. Comparing a fund's performance with others of the same vintage year gives a fairer picture than comparing funds started in different years.
For example, funds that began investing in 2009, after the financial crisis, could buy companies at low valuations and benefited from a long economic recovery. Funds that invested heavily in 2007, at the peak of the market, faced a difficult period. Comparing these funds directly would mostly reflect timing, not manager skill.
Investors often spread their commitments across several vintage years, a practice called vintage diversification, to avoid being too exposed to conditions in any single year.
Performance benchmarks for private funds are usually published by vintage year, showing quartiles of returns. A fund in the top quartile for its vintage year has outperformed most similar funds that started at the same time.
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