The data is in, and smaller niche-focused private equity funds are what limited partners are looking for these days. Sector specialists outperformed generalist funds year-over-year between 2001 and 2010, according to a recent research note from Cambridge Associates.

The internal rate of return for specialized funds outperformed the IRR for generalist funds by an average of 10 percent, as of December 2013. The data in Flag Capital’s recent white paper shows that funds with greater than $750 million have a net IRR of 6.3 percent over a 10-year period compared with 12.2 percent for firms with less than $750 million.

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