Who is The Best Private Equity Firm? Benchmark Private Equity Effectively by Comparing Apples-to-Apples

The number of private equity firms competing for institutional investors’ dollars is vast and this saturated market leaves LPs with an immense opportunity and challenge: choice. Comparing firms using the current performance metrics introduces a number of biases and distortions that can influence decision-making negatively. Finding an apples-to-apples comparison between GPs can be extremely challenging.

Traditional private equity benchmarks rely upon vintage year analysis and are, as a result, of limited utility. The vintage year categorization groups funds together that have very different investment focuses while funds with similar investment focuses from different, but consecutive, vintage years nevertheless are in the market together competing for similar deals and LP commitments.

There is a pressing need within the industry to establish a reliable mechanism to identify truly comparable, relevant peers of a given GP, avoiding the inherent limitations of relying on vintage year..  While some GPs do offer up competitive peer sets, these internally developed lists are subjective and inherently biased.  PERACS can empirically derive those funds which directly compete with a given GP for investment opportunities.

The PERACS Relevant Peer Benchmark seeks to compare those funds which are active in the same space within the PE industry should be done in an objective fashion. PERACS begin this process by creating “strategic cells,” which are derived from a combination of:

  1. Industry sector
  2. Region
  3. Investment time period
  4. Deal size

As an example, all upper-mid-cap automotive deals made in the United States between 2010 and 2013 deals would be in the same strategic cell. To learn more about empirical benchmarking by PERACS click here.

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