Vintage year

Vintage year in the private equity and venture capital industries is a year in which the firm began making investments.^[1][2]

Overview

The year of investing is an important and widely used metric to compare performance of the investments financed in the year in question against that of the investments financed in other years or against that of the general market (S&P 500). As the external market conditions change following the overall business cycle,^[3] so does performance of investments. Therefore, returns of 50% on investments done in good years are not directly comparable to returns of 10% done in crisis years. That is why a vintage year is taken into account.^[4] The returns are comparable if investments share approximately the same timing.

Origin

Most likely, the term vintage year is borrowed from the winemaking industry, where it is also used to divide wines in comparable classes.

References

1. "Private Capital Markets - Data & Insights - VC Experts". Retrieved 24 February 2015.
2. "Private Equity Performance". Retrieved 24 February 2015.
3. "Vintage Year". Investopedia. Retrieved 24 February 2015.
4. Returns and IRRs – an explanation

External links

• 2012 could be a good vintage year for private equity investments
• Private Equity: The Propaganda versus the Facts
• Measuring returns in Private Equity