Although historical fund performance may not always be an indication for future success, analysis in the 2016 Preqin Alternative Assets Performance Monitor shows that the majority of buyout fund managers with a top-quartile fund surpass the median benchmark with their next fund in the series. Conversely, those with prior poor performance are less likely to be among the top performers with their next fund.
To examine this, Preqin generates quartile rankings for individual funds according to their investment strategy, geography and vintage. This enables quartile rankings to be assigned using a combination of both the IRR and multiple rankings of each constituent buyout fund, with equal weight placed on both. The lower the average score, the more consistently the fund manager has performed. The scores are calculated by assigning top-quartile funds a score of one, second-quartile funds a score of two and so on, with the average of the scores finally taken*. The table below shows the most consistent top performing buyout fund managers.
Given that over half of the 203 firms considered for this table are US based, it is unsurprising that they appear most often in the top 11, as well as representing three of the six firms achieving a top score of 1.00. Inflexion, a UK-based firm, tops the table with a score of 1.00, with all four of its buyout funds that were eligible for inclusion in the rankings in the top quartile. Interestingly, FIMI, the only Middle East-based GP, makes the top 11 with a score of 1.20.
In an increasingly saturated market, fund selection is of greater significance for investors as they look to source the fund managers that can add value to their portfolios. Performance information on more than 8,300 private equity & venture capital vehicles on Private Equity Online can assist investors in the identification of those GPs that can deliver the returns they seek.
*Funds of vintage 2014-2016 are excluded as these funds are deemed to be too early in their lifecycle to generate meaningful IRRs. Furthermore, only fund managers that have raised at least three funds of a similar strategy are considered, as well as those that have raised a fund within the past six years.