Abstract

We utilize results of a survey of Small Business Investment Companies (SBICs), along with
data from MSCI-Burgiss, to perform a novel analysis of SBIC performance. Overall, we find via
the survey that SBIC funds outperform comparable non-SBIC peers by an average of around
4% (median of 2.6%) in terms of IRR and an average of about 0.7x (median of 0.3x) in terms of
multiple on invested capital (MOIC). We also examine SBICs in the MSCI-Burgiss data which
is available for a smaller sample but should be free of selection bias (e.g., from self-reporting).
The MSCI-Burgiss sample also shows outperformance of SBICs relative to comparable non-
SBIC peers but the magnitude is smaller. The MSCI-Burgiss funds also have complete cash
flow data, so we are able to calculate Kaplan-Schoar public market equivalents (PMEs). We
find that both the average and median PMEs of SBICs are greater than 1.0 indicating that they
outperformed public benchmarks as a group. Funds with a leverage ratio between 1.00-1.75x
appear to yield the highest excess IRR though these results depend on strategy. In a regression
analysis we find that larger funds tend to generate higher IRR and MOIC when controlling for
other factors such as vintage year and strategy.

Authors

Greg Brown, UNC Kenan-Flagler Business School & Institute for Private Capital
Wendy Hu Ph.D., MSCI Private Capital Solutions
David Robinson, Duke Fuqua School of Business and NBER
William Volckmann, Institute for Private Capital