Do First-Time Funds Warrant a “Flight to Safety?” Evidence from PE and VC
Amid a broader private markets slowdown, heightened uncertainty has prompted LPs to shift capital toward established managers in a “flight to safety,” posing fundraising challenges for first-time funds. First-time private equity (PE) funds’ share of total PE fundraising fell from 5.9% in 2021 to 4.1% in 2024 and 3.4% through the first three quarters of 2025. Similarly, first-time venture capital (VC) funds represented only 8.6% of total VC fundraising in 2024 compared to 12.1% in 2021, though 2025 figures (12.2% through Q3) point to a potential rebound.
These fundraising trends raise the question: is this shift away from first-time funds consistent with their historical performance?
To consider this question, we look at fund performance data from Preqin. We include funds formed during the twenty-year period from 2003 to 2022, ensuring funds have had at least three years (as of 2025) to realize returns. For these funds, we plot the return distributions using total value to paid-in capital multiples (TVPIs, or net multiples) separately for first-time funds (i.e., the first fund raised by a firm) and non-first-time funds (i.e., any subsequent fund raised by a firm with prior fundraising history). We weigh these distributions by fund size, such that larger funds carry proportionately greater weight.
Figure 1 illustrates TVPIs for global PE funds. Two major takeaways emerge when comparing the historical performance of first-time and non-first-time funds. First, first-time funds have exhibited greater downside risk: on a capital-weighted basis, 10.5% failed to return LPs’ capital (TVPI < 1.0), compared to 7.4% of non-first-time funds. Second, first-time funds demonstrated greater upside potential, as 7.8% of capital was invested in funds achieving a TVPI above 3.0x compared to 2.3% for non-first-time funds.
Table 1 in the Appendix more formally evaluates these differences with statistical tests and finds that first-time funds have exhibited both a significantly higher mean TVPI and standard deviation.[3] The likelihood of exceeding a TVPI of 3.0 was significantly greater for first-time funds, whereas left-tail differences are less significant.
These trends are similar among VC funds, as illustrated by Figure 2. The capital-weighted share of first-time funds generating a TVPI below 1.0 (23.4%) was marginally lower than that of non-first-time funds (24.0%). However, first-time funds were more than twice as likely to experience deeply impaired outcomes (TVPI ≤ 0.6: 10.0% of first-time funds versus 4.4% of non-first-time funds). At the upper end of the distribution, 15.2% of capital in first-time VC funds achieved a TVPI above 3.0x, compared to 6.3% for non-first-time funds. In other words, the return dispersion observed among first-time PE funds is even more pronounced in VC.
As with PE, the statistical tests reported in Table 2 of the Appendix indicate that first-time VC funds have exhibited both a significantly higher mean TVPI and higher standard deviation.[5] These funds were also significantly more likely to achieve a TVPI above 3.0, while differences in downside outcomes are less statistically significant.
These return data suggest that first-time managers can generate compelling upside, but manager selection is crucial. Establishing a new PE or VC firm introduces operational and strategic complexities, and prior investment success within an non-first-time platform may not translate into success as a firm manager. The higher rate of underperformance among first-time funds (and greater standard deviation in fund returns) helps explain LPs’ inclination to de-risk toward non-first-time managers during volatile periods.
However, several factors also contribute to the higher likelihood that first-time managers achieve outstanding returns. Smaller fund sizes can enable participation in smaller deals, often at favorable valuations.[6] Incentive alignment tends to be stronger, as future fundraising (and firm viability in general) prospects depend heavily on early performance.[7] Moreover, first-time and emerging managers may benefit from an entrepreneurial focus and organizational agility. While access to top-tier non-first-time managers is often constrained, backing an emerging manager may provide LPs with early access to a platform that may later become oversubscribed.
Underwriting a first-time manager is inherently more complex in the absence of a realized track record. With that said, these returns suggest that LPs capable of identifying high-quality emerging managers can unlock substantial upside.
Appendix
[1] Hilary Wiek, Kyle Walters, Anikka Villegas, Juan Mier, and Nalin Patel, Q3 2025 Global Private Market Fundraising Report (PitchBook Data, Inc., November 25, 2025), PitchBook, https://pitchbook.com/news/reports/q3-2025-global-private-market-fundraising-report.
[2] This graph includes a sample size of 553 first-time funds and 2,118 non-first-time funds. We define a “first-time fund” as the first fund raised by a firm, and an “non-first-time fund” as any subsequent fund raised by a firm with prior fundraising history. TVPIs are calculated from inception up to the most recently available data as of February 5, 2026 for funds with vintage years 2003–2022 and available fund size data. The sample is limited to global closed-end funds with available fund size data and the following strategies on Preqin: Buyout and Growth. Source: Author’s analysis of Preqin data, accessed February 5, 2026.
[3] Note that although Harris et al. (2023) rely on Burgiss rather than Preqin data and evaluate performance as of December 2020, they similarly find that first-time buyout funds achieve a higher average TVPI than non-first-time funds for vintages 1984–2015 (1.92 vs. 1.78) and 2001–2015 (1.79 vs. 1.78). Source: Robert S. Harris, Tim Jenkinson, Steven N. Kaplan, and Ruediger Stucke, “Has persistence persisted in private equity? Evidence from buyout and venture capital funds,” Journal of Corporate Finance 81 (2023), https://www.sciencedirect.com/science/article/pii/S092911992300010X.
[4] This graph includes a sample size of 614 first-time funds and 3,049 non-first-time funds. We define a “first-time fund” as the first fund raised by a firm, and a “non-first-time fund” as any subsequent fund raised by a firm with prior fundraising history. TVPIs are calculated from inception up to the most recently available data as of February 5, 2026 for funds with vintage years 2003–2022 and available fund size data. The sample is limited to global closed-end funds with the following strategies on Preqin: Venture (General), Early Stage, Early Stage: Seed, Early Stage: Start-up, Expansion / Late Stage. Source: Author’s analysis of Preqin data, accessed February 5, 2026.
[5] Note that although Harris et al. (2023) rely on Burgiss rather than Preqin data and evaluate performance as of December 2020, they similarly find that first-time VC funds achieve a higher average TVPI than non-first-time funds for vintages 1984–2015 (2.46 vs. 2.33) and 2001–2015 (2.70 vs. 2.29). Source: Robert S. Harris, Tim Jenkinson, Steven N. Kaplan, and Ruediger Stucke, “Has persistence persisted in private equity? Evidence from buyout and venture capital funds,” Journal of Corporate Finance 81 (2023), https://www.sciencedirect.com/science/article/pii/S092911992300010X.
[6]Using buyout fund return data, Bhardwaj et al. (2025) find that a 1% increase in fund size is associated with a 1 percentage point decline in IRR. They attribute much of this effect to larger funds pursuing larger deals, which tend to underperform. This reflects the finding in Brown et al. (2020) that smaller buyout deals tend to outperform, although there is no clear relationship between investment size and returns for VC deals.
Sources: Abhishek Bhardwaj, Abhinav Gupta, Sabrina T. Howell, and Kyle Zimmerschied, “Does Fund Size Affect Private Equity Performance? Evidence from Donation Inflows to Private Universities,” SSRN, posted April 1, 2025, last revised July 1, 2025, https://papers.ssrn.com/sol3/papers.cfm?abstract_id=5176907; Gregory W. Brown, Robert S. Harris, Wendy Hu, Tim Jenkinson, Steven N. Kaplan, and David T. Robinson, “Private Equity Portfolio Companies: A First Look at Burgiss Holdings Data,” SSRN, January 17, 2020, https://ssrn.com/abstract=3532444.
[7]Ivashina and Lerner (2019) finds that senior partners with strong track records are more likely to leave a partnership when their share of fund economics (carried interest and ownership) is relatively small. Many of these departing partners go on to establish their own firms, in which their incentives are better aligned.
Source: Victoria Ivashina and Josh Lerner, “Pay Now or Pay Later? The Economics within the Private Equity Partnership,” Journal of Financial Economics 131, no. 1 (January 1, 2019): 61–87, https://doi.org/10.1016/j.jfineco.2018.07.017.
[8]This sample includes 553 first-time funds and 2,118 non-first-time funds. A “first-time fund” is defined as the first fund raised by a firm; a “non-first-time fund” is any subsequent fund raised by a firm with prior fundraising history. The sample consists of global closed-end Buyout and Growth funds (Preqin) with vintage years 2003–2022 and available fund size data. TVPIs are measured from inception through the most recent data available as of February 5, 2026. Equal-weighted metrics assign the same weight to each fund regardless of size, whereas capital-weighted metrics weight funds according to their size, giving larger funds greater influence. Equal-weighted mean differences are tested using Welch’s t-test, which does not assume equal variances. Capital-weighted mean differences are tested using weighted least squares, weighting each fund by its size. Source: Author’s analysis of Preqin data, accessed February 5, 2026.
[9]This sample includes 614 first-time funds and 3,049 non-first-time funds. A “first-time fund” is defined as the first fund raised by a firm; a “non-first-time fund” is any subsequent fund raised by a firm with prior fundraising history. The sample consists of global closed-end funds with the following strategies on Preqin: Venture (General), Early Stage, Early Stage: Seed, Early Stage: Start-up, and Expansion / Late Stage, with vintage years 2003–2022 and available fund size data. TVPIs are measured from inception through the most recent data available as of February 5, 2026. Equal-weighted metrics assign the same weight to each fund regardless of size, whereas capital-weighted metrics weight funds according to their size, giving larger funds greater influence. Equal-weighted mean differences are tested using Welch’s t-test, which does not assume equal variances. Capital-weighted mean differences are tested using weighted least squares, weighting each fund by its size. Source: Author’s analysis of Preqin data, accessed February 5, 2026.
