Vintage year

The period in which capital was actually committed, which fixes the level of entry prices a position carries for its whole life.

Example

The same business bought when prices are 40% higher returns about 71.4% of the multiple it would otherwise have produced - a 5 times outcome becomes 3.57 times.

Important

It is the one dimension of spread entirely within your control and the one most often ignored, because spreading it means declining to invest while you are enthusiastic and have money available.

Related terms

• Deployment pace — How quickly an allocation is actually committed - the difference between putting the whole amount to work in one window and spreading it across several years.
• Stage diversification — Spreading private-market positions across how mature the underlying companies are, from earliest to latest.
• Holding period — How long you keep an asset before selling it.

Lessons that explain it

• Access and diversification, bought with a second layer of fees — Funds of funds and investment platforms give individuals access to managers and diversification they could not reach directly, in exchange for fees charged on top of the underlying funds' own fees. (11 min)
• Stage, sector and geography: where the spread is real — Portfolios are usually spread along the dimensions that are easy to label rather than the ones that determine whether two holdings fall together. This lesson is about telling the two apart. (11 min)
• Look at the whole portfolio, not just each company — Reviewing positions one at a time hides concentration by sector, stage, vintage and business model. A periodic portfolio-level view shows exposures no single company report reveals. (11 min)
• Appraising one fund: where returns came from, and how often deals lost money — A buyout track record is judged by its dispersion, its loss rate and the source of its gains, not by the average multiple. (13 min)
• You are not buying startups. You are signing a ten-year promise to a manager. — An LP commitment in a venture fund is a legal obligation to hand over money when asked, for about a decade, to someone who decides everything about how it is used. (10 min)
• Appraising one fund: the manager, the finished track record and the fit — Evaluating a venture fund is mostly evaluating a team and whether their past results came from something repeatable. (14 min)

All 578 terms in the Investing glossary