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A 15% net IRR from a European middle market buyout fund and a 15% net IRR from a North American one are the same number. They are not necessarily the same result. The two funds bought companies at different valuations, sold into different exit markets, and competed against different sets of managers.
That is why geography is one of the standard filters in private fund benchmarking, alongside asset class, strategy, vintage year, and fund size. It rarely decides on its own whether a fund is good, but it often decides who that fund should be compared against.
In this article, we'll cover why geography matters in a peer group, where it fits among the other filters, when a geographic cut goes too far, and how regional labels can quietly skew a benchmark.
Why Geography Matters in a Peer Group
The goal of any benchmark is to compare a fund with others that faced the same conditions. Vintage year handles timing: funds that started investing around the same time faced the same entry pricing and the same macro backdrop. Geography handles place.
Region shapes several of the inputs that drive private fund returns:
- Exit markets. The depth of local IPO markets and the number of strategic and sponsor buyers affect how and when a fund can sell.
- Valuation multiples. Entry and exit multiples differ by region, so similar operating results can produce different returns.
- Competition. The number of managers chasing deals in a region affects pricing.
- Currency. A fund investing in one currency and reporting in another carries an extra layer of return that has nothing to do with the underlying companies.
Most benchmarks cut geography into broad regions such as North America, Europe, Asia-Pacific, and global. Those cuts don't capture every local difference, but they keep a fund from being ranked against peers that operated in a very different market.
Where Geography Fits Among the Filters
Geography is one layer in a peer group, not the first one. A practical order is:
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Asset class. Private equity, venture capital, private credit, real estate, and infrastructure have entirely different return profiles.
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Strategy. Small, middle, and large market buyout, or growth equity, differ in capital structure and hold periods.
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Vintage year. Funds should be compared with others that started investing around the same time.
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Geography. Region adjusts for exit markets, multiples, and competition.
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Sector and fund size. These refine the group further when the sample allows.
The order matters because each filter removes funds. Checking the fund count after every layer shows which filter shrank the sample, and that tells you where to give ground if the peer group gets too small.
When a Geographic Cut Goes Too Far
A narrower peer group is more relevant, but it is also smaller. Stack a single vintage, a sub-strategy, and a single region on top of each other and the remaining sample can drop to a handful of funds. At that point, a quartile ranking stops meaning much: in a peer group of 8, each quartile holds 2 funds, and beating one more fund moves a manager a full quartile.
Dakota's guide to Best Practices for Creating Private Fund Performance Benchmarks
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Peer group size
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How to treat the result
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Fewer than 10 funds
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A list of comparables, not a benchmark
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10 to 19 funds
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Directional context; state the sample size
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20 to 39 funds
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Credible for most reporting and IC discussions
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40+ funds
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Stable quartile bands
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When the count falls too low, drop the filter that matters least for that fund's returns. For a software-focused buyout fund, sector usually matters more than a narrow region, so geography is often the first filter to widen. Moving from a single region to a broader one, or to global, is reasonable as long as the benchmark is labeled that way.
How Geography Gets Assigned, and Where It Goes Wrong
A geography label looks simple, but someone has to decide what it means. A fund can be tagged by where the manager is headquartered or by where the fund actually invests, and those are not always the same place.
A few common problems:
- Headquarters versus portfolio. A London-based manager investing mostly in North American companies can land in a European benchmark even though its deals, multiples, and exits look North American.
- Multi-region funds. Funds investing across several regions often get forced into a single bucket or into "global," which mixes very different exposures.
- Drift over time. A fund that launches with a regional focus and expands elsewhere usually keeps its original label.
None of these makes a benchmark wrong on its own. They are reasons to check how the label was assigned before reading too much into a regional quartile. Dakota's How Private Fund Benchmarks Are Actually Built covers the same issue for strategy labels.
What This Means for Fund Managers
When you cite a benchmark in a deck or a DDQ, say which region it covers and how many funds sit behind it. If you widened the geography to build a large enough sample, label it as a broader regional or global benchmark.
If your fund invests outside the region where you're based, consider showing both cuts: one by headquarters and one by where the portfolio actually sits. Allocators will often build their own peer group anyway, and a manager who has already shown the comparison side by side starts the conversation with more credibility.
Benchmark Against the Right Region
Dakota Private Markets covers 18,000+ private funds and 159,000+ performance records across seven asset classes. Filter by strategy, vintage year, geography, fund size, and portfolio company sector, and see how many funds match before you rank against them.
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