Bison launches benchmarks to help fill vacuum left by Venture Economics

Less than a year after Thomson Reuters outsourced its benchmarking to Cambridge Associates, the Boston-based company plans to introduce a series of benchmarks, marketed as Bison Benchmarks, to help institutional investors determine how the performance of a single fund measures up against a population of peers. (Thomson Reuters until early October was the publisher of Buyouts.) 

The free-to-all benchmarks, available for download on the Bison website today, are initially available via PDF (showing top-line results) and Excel files (showing the names of funds represented in each index). Down the road, the firm plans to incorporate the benchmarks into its Bison online performance platform, which among other features provides paying subscribers with performance data on more than 3,700 individual funds undergirding the benchmarks.

“Bison just wants to make it easy for everyone to understand performance in private equity,” said Mike Nugent, co-founder and CEO at Bison. At press time Buyouts was unable to reach an executive at Cambridge Associates for comment.  

Nugent said that over just the last six to eight weeks he’s received some two dozen requests from consultants for an alternative benchmark to address at least two perceived shortcomings of rivals—lack of transparency, and selection bias. Competing benchmarks don’t necessarily disclose the names of the underlying funds, according to Nugent. Disclosing the funds makes the Bison benchmarks more investable, should investors want to match their performance. Users can also get a sense for how broad the investor base is for each fund, a proxy for how accessible it is, Nugent said.

In addition, Bison gathers its performance data exclusively from more than 200 limited partners located in the Australia, Canada, Denmark, United Kingdom, United States and Sweden. The investors don’t cherry-pick what they provide. That helps to mitigate the so-called selection bias that arises when benchmark providers rely on data from general partners, who may, out of embarrassment or other reasons, stop providing data on funds that are performing poorly.

The Bison benchmarks, nine initially, show the performance of funds operating in three regions – global, North America and outside North America. For each region Bison has created benchmarks corresponding to three investment strategies: all private equity, buyouts and venture capital/growth equity. The data is current as of March 31.

Each benchmark shows bottom-quartile, median, and top-quartile net IRRs, investment multiples and distributions-to-paid-in multiples, along with bottom-fence and top-fence values calculated to approximate the lower and upper limits of performance while ignoring big outliers. Also provided is a momentum score that shows year-over-year changes. The vintage year range is 1992 to 2012. The benchmarks are not weighted for fund size or other factors.

Nugent and co-founder and COO Rasmus Goksor launched eight-person Bison toward the end of 2011. Nugent had worked for four and a half years as head of North American due diligence at fund-of-funds manager SVG Advisers; Goksor, in addition to working at two other startups involved in Web development, previously worked as a venture capital and startup attorney at Gunderson Dettmer. Bison has venture backing, Nugent said. 

Following commercial launch of its platform this June the company has drawn some 70 institutional clients – LPs, GPs and service providers – typically paying $5,000 to $10,000 a year for unlimited seats and the unlimited ability to download data. Altogether Bison has about 17,000 funds in its database managed by over 5,100 GPs. Of those, about 2,500 are in the market while about 500 are expected to return to market over the next six to 12 months, Nugent said.