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Are You Allocated to a Private Equity Firm Ranked in this Study?



private equity performance

Since 2009, Professor Oliver Gottschalg of Paris-based HEC Business School, also known as école des Hautes Etudes Commerciales de Paris, has put out an annual ranking on top performing private equity firms. The 2014 HEC-DowJones Private Equity Performance Ranking illustrates private equity firms’ historic performance and expected “future competitiveness” based on a number of criteria. The rankings help denote which private equity investors generate top performance over a period of years.

Gottschalg’s in-depth methodology calculates the aggregate performance of a private equity firm based on a suite of measures which include: distribution to paid-in capital, total value to paid-in capital and a fund’s internal rate of return (IRR). Some of the statistically significant factors possessed by top-quartile private equity firms are firms that focus on fewer industries and not heavily diversified. Another factor are private equity firms that are great at timing the public markets (knowing when to buy and sell).

Gottschalg’s study assembles data on 329 private equity firms and 558 funds raised from 2001 to 2010, with an aggregate volume of US$ 1.014 trillion. DJX Dow Jones provided the database to conduct the study.

Making the top 10 includes, Texas-based buyout shop Vista Equity Partners at #1. Vista Equity Partners was founded by Robert Smith and Brian Sheth back in 2000. The former Goldman Sachs technology bankers have amassed a veteran team of private equity executives, allocating capital to investments like Misys, Lanyon, Tibco and Autotask. Vista Equity Fund III generated a net IRR of 29.8% as of June 2014. Vista Equity Partners came in second in 2013.

Coming in at #2 is Netherlands-based Waterland Private Equity Investments B.V. whose investment portfolio has notable firms such as Perrigo Company plc and FleetPro. The number #3 spot goes to Tom Gores’ Platinum Equity, LLC which was founded in 1995. Portfolio companies include: MegaPath, Ryerson, Quark, Terratest and Transworld Systems.

The listed score is a relative to the average aggregate performance score of all firms analyzed in the sample.

Top 15 – 2014 HEC-DowJones Private Equity Performance Ranking

Rank Private Equity Firm Performance Score
1 Vista Equity Partners 1.57
2 Waterland Private Equity Investments B.V. 1.36
3 Platinum Equity 1.08
4 Odyssey Investment Partners 1.07
5 Berkshire Partners 1.02
6 ABRY Partners LLC 0.97
7 Clayton Dubilier & Rice 0.97
8 Astorg Partners 0.94
9 Onex Partners 0.89
10 Sun Capital Partners Inc. 0.88
11 Baring Private Equity Asia 0.86
12 Varde Partners Inc. 0.85
13 Apollo Investment Corporation 0.84
14 BLUM Capital Partners 0.78
15 Ares Capital Corporation 0.76

To see the whole list and Gottschalg’s methodology, click here
Source: PERACS

Will CalPERS Double its Allocation to Private Equity?



Yu Ben Meng, the new Chief Investment Officer of the California Public Employees Retirement System (CalPERS), detailed a picture on why the institutional investor needs to augment its allocation to private equity. [ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]

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Minutes Describe Fed Expecting to End Balance Sheet Reduction by Year-End



The U.S. Federal Reserve board released minutes from its January 2019 meeting. There was a split among board members whether any interest rate increases would be necessary for this year. In addition, these officials chatted about ceasing the reduction of bonds on the central bank’s balance sheet before the end of 2019. Board members are keeping an eye on the stock market and current credit spreads. The Federal Reserve started reducing its bond portfolio in October 2017, a measure of quantitative tightening (QT). The US$ 3.8 trillion pool of bonds held by the central bank’s balance sheet is a topic of concern for U.S. fixed income investors.

Minutes of the Federal Open Market Committee
January 29-30, 2019

An excerpt from the minutes details that “Participants commented that, in light of the Committee’s longstanding plan to hold primarily Treasury securities in the long run, it would be appropriate once asset redemptions end to reinvest most, if not all, principal payments received from agency MBS in Treasury securities. Some thought that continuing to reinvest agency MBS principal payments in excess of $20 billion per month in agency MBS, as under the current balance sheet normalization plan, would simplify communications or provide a helpful backstop against scenarios in which large declines in long-term interest rates caused agency MBS prepayment speeds to increase sharply. However, some others judged that retaining the cap on agency MBS redemptions was unnecessary at this stage in the normalization process. These participants noted considerations in support of this view, including that principal payments were unlikely to reach the $20 billion level after 2019, that the cap could slightly slow the return to a portfolio of primarily Treasury securities, or that the Committee would have the flexibility to adjust the details of its balance sheet normalization plans in light of economic and financial developments. Participants commented that it would be important over time to develop and communicate plans for reinvesting agency MBS principal payments, and they expected to continue their discussion of balance sheet normalization and related issues at upcoming meetings.

Following the discussion, the Chairman proposed that the Committee communicate its intentions regarding monetary policy implementation and its willingness to adjust the details of its balance sheet normalization program by publishing a statement at the conclusion of the meeting. All participants agreed with the proposed statement.

(Adopted January 30, 2019)

After extensive deliberations and thorough review of experience to date, the Committee judges that it is appropriate at this time to provide additional information regarding its plans to implement monetary policy over the longer run. Additionally, the Committee is revising its earlier guidance regarding the conditions under which it could adjust the details of its balance sheet normalization program.5 Accordingly, all participants agreed to the following:

The Committee intends to continue to implement monetary policy in a regime in which an ample supply of reserves ensures that control over the level of the federal funds rate and other short-term interest rates is exercised primarily through the setting of the Federal Reserve’s administered rates, and in which active management of the supply of reserves is not required.
The Committee continues to view changes in the target range for the federal funds rate as its primary means of adjusting the stance of monetary policy. The Committee is prepared to adjust any of the details for completing balance sheet normalization in light of economic and financial developments. Moreover, the Committee would be prepared to use its full range of tools, including altering the size and composition of its balance sheet, if future economic conditions were to warrant a more accommodative monetary policy than can be achieved solely by reducing the federal funds rate.”

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Vision Fund Investors Display Stress on Frothy Market Valuations



Led by Masayoshi Son, Japan-based SoftBank Group Corporation continues to run the gargantuan Vision Fund scooping up exciting technology investments, both big and small globally. Armed with a roughly US$ 100 billion warchest, the Vision Fund has been disrupting both suppliers of capital and the industries that receive it. Are the big-money limited partners of the Vision Fund the technology backers of last resort? Two of the major backers of the Vision Fund are Saudi Arabia’s Public Investment Fund and Abu Dhabi-based Mubadala Investment Company. SoftBank has invested billions into tech companies like Compass, Katerra Inc, WeWork Cos., Coupang, DoorDash, and Uber Technologies. For example, a beneficiary of the Vision Fund, Katerra is a manufacturer of modular building parts, in which many people question the company’s profitability and business model. Uber is driving toward its initial public offering. SoftBank recently participated in an investment round in Clutter, a storage company.

[ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]

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