Private Equity - No Survivorship Bias?

CFA Level III Portfolio Management
#1

Hi all,

Could someone please explain why there can be survivorship bias when evaluating the performance of hedge funds but not when evaluating a private equity fund?

Thanks

#2

Because PE funds don’t provide an apples to apples comparison - so comparing them against each other inside a benchmark is not a very wise idea. Which is why we don’t necessarily care when one goes **** up. Whereas a with a hedge fund, they have a relatively better matched ability to participate in investments in the same companies (or styles), so, at least as far as that goes creating a benchmark is not a horrible idea - which now makes it far more relevant if one should fail, and fall out of the benchmark.The most prominent issue with PE benchmarks is the vintage effect - that being the most suitable benchmark for a PE fund will have the same vintage as the vintage of the fund itself.

#3

hedge fund = survivorship bias

PE fund = stale price bias