Vintage

The exam’s classic setup gives you two funds with different IRRs and asks which manager performed better — the trap is comparing them head-to-head. The correct move is to benchmark each against its own vintage-year peer group (quartile rank), not against each other, because macro entry/exit conditions, not skill alone, drive much of the raw-return gap. Watch for the “same strategy, different years” tell: a buyout fund struck near a market peak faces high entry multiples, so its return reflects timing as much as the three buyout value levers (deleveraging, operational improvement, multiple expansion).

A frequent error is conflating vintage with the fund’s launch or final-close date — vintage is anchored to the first drawdown of capital, tied to the capital-call schedule of the J-curve, so it is fixed long before most committed capital is deployed. Don’t confuse vintage-year diversification (spreading commitments across years) with diversifying across strategies like buyout versus venture. Hook: think wine — judge each bottle only against its own harvest year.