Ranking the world’s best private equity firms.
Every private equity firm likes to brag about its fund performance, to the point that terms like “top quartile” have virtually lost their meanings. But Oliver Gottschalg, a professor of management strategy at HEC in Paris, isn’t satisfied by knowing which group of firms are the world’s best-performers. He wants to rank them, one-by-one.
Gottschalg and Dow Jones this morning released their latest edition of the PE Performance Ranking Report, which analyzes 112 firms that raised around $726 billion for 726 funds between 1998 and 2007. Here is how Gottschalg explains his rankings:
The aggregate performance score is neither an IRR-type annual return measure nor a money multiple. It can only be interpreted relative to the average aggregate performance score of all firms we analyzed: An aggregate performance score of 1 means that a given PE Firm has an aggregate performance that is one “standard deviation” above the average performance, which would position it typically at the 85th percentile, i.e. 85% of all firms would have a lower aggregate performance. Also, an aggregate performance score of 2 means that performance is twice as high as for an aggregate performance score of 1. A PE Firm with the average performance has (by design) an aggregate performance score of 0.
This year’s top firm was Waterland Private Equity, a Dutch group founded in 1999, which received a score of 2.42. This was a jump from third place in last year’s ranking (when it received a 2.27). Leonard Green & Partners, which has led this ranking for the past two years, fell completely out of the top 20.
Following Waterland were Friedman Fleischer & Lowe (2.32), Platinum Equity (2.10), Hellman & Friedman (1.63) and TPG Capital (1.5). Below is the full report:
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