Advent International, Vista Equity Partners, Berkshire Partners and Thoma Bravo are the latest entrants to have qualified for the HEC Private Equity Value Creation Hall of Fame – a ranking of the most successful private equity funds.
Launched in 2017 by Oliver Gottschalg, associate professor of strategy at business school HEC Paris and co-founder of its private equity observatory research centre, the ranking evaluates vehicles based on three key hurdles.
To qualify, entrants must have generated:
- at least $2 billion in cash-on-cash alpha gain;
- “PERACS Alpha” of at least 15 percent return;
- at least 2x cash-on-cash multiple.
Gottschalg said: “The HEC PE value creation hall of fame celebrates PE funds with truly outstanding levels of value creation for their investors, as measured by multiple factors to assess performance both in absolute and in relative terms, both annualised and overall.”
The most outstanding private equity funds are strategically positioned in a “highly differentiated fashion” and demonstrate a rhythm of investment that is de-coupled from the overall activity pattern of all private equity, he added.
At $822.5 million, the 2008-vintage Thoma Bravo Fund IX is the smallest entrant to the Hall of Fame. Fund IX generated an internal rate of return almost three times greater than its peer benchmark, which comprises 10 funds that directly compete with a given manager.
Vista Equity Partners Fund III, a $1.29 billion 2007-vintage, demonstrated a low level of strategic overlap, reflecting the firm’s position as a pioneer of its sector. Its peer group performed reasonably poorly, suggesting its rivals found the strategy tricky to replicate.
A 2001-vintage, Berkshire Partners Fund VI is one of the Hall of Fame’s older entrants. The $1.58 billion vehicle generated a low level of procyclicality, which is defined as a comparison of the timing of the fund’s investment patterns with the overall private equity universe.
Berkshire IV’s low figure indicates proprietary sourcing and deal types, while the 11 percent net internal rate of return earned by its peer suggests their strategy did not perform well for others.
Advent Global Private Equity IV, a $1.9 billion 2001-vintage, is the firm’s second entrant to the Hall of Fame. The vehicle had low procyclicality, indicating proprietary sourcing and deal types.