SR Berlin 2015 - Let Talk About Risk

Lets talk about Risk !
New Approaches to bring Risk into the

center stage of PE Investing
Prof. Oliver Gottschalg of HEC Paris
Founder and Head of Research,
PERACS Independent PE Track Record Analytics and Certification
Bigger Picture: Challenges with Data and Measures

in PE: What GPs frequently say about themselves
"We are a Top Quartile

Performer."
"Our value creation is

based on operational
expertise."
"We proactively
generate proprietary
dealflow."
"Our unique
investment strategy
differentiates us from
our competitors."
makes LPs wonder how to spot true

future outperformers in a group of GPs
?
3
A possible Answer: The Suite of PERACS Analytics

Insights into Performance, Risk and Strategy
Metric 1a
Absolute and Relative Performance
Metric 2
Relevant Peer IRR Benchmark
Mega Partners, LLC - Aggregate

Performance is measured in
the excess of the cost of the
forgone opportunity
investing capital elsewhere,
which is approximated by
the MSCI World index, both
in absolute multiple terms
based on the PERACS
Profitability Index and on an
annualized basis through
the PERACS Alpha, based on
the duration of the
investment.
2.49x
2.18x
30.70%
Metric 1c
Components of PERACS
Alpha
TVPI
Variable-Rate
7.6%
30.7%
6.5%
Delevered
Alpha
Sector
Choice
Effect
Replicable Unique PE
Leverage Leverage
Eff
Eff
PERACS
Alpha
Benchmark represents the

Metric
2 of
aggregate performance
those PE funds who have
been empirically identified
Relevant
Peer TVPI Benchmark
as similar competitor using
28.8%
22.0%
20.0%
best available
purchased
Mega
Partners,
LLC - Aggregate
16.0%
12.3%
industry benchmarks ( that

may contain IRR time bias
imperfections).
3.3x
2.5x
PERACS Alpha
Fund A
Profitability Index
0.9%
15.7%
The Relevant Peers
29.0%
Fund B
Focal Fund IRR
2.2x
Fund C
2.4x
2.1x
Relevant Peer Benchmark IRR
1.4x
37
PERACS Alpha can be driven by

a (a) choice of an industry
sector or geography in which
also public companies outperform the MSCI world index,
(b) by a fundamental outperformance of the acquired
business(es) over their publicly
traded peers (the delivered
PERACS Alpha) net of any
differences in leverage, or (c)
by leverage. This distinguishes
between the replicable effect
of incremental leverage on the
performance of the publicly
traded peers and the unique
effect of incremental leverage
on the delivered alpha.
40
Fund A
Metric 5a
Lorenz Curve by % of Deals
Fund B
Focal Fund TVPI
Fund C
Relevant Peer Benchmark TVPI

41

100%
The PERACS Risk Curve

illustrates the portion of the
cumulative PERACS Alpha
generated by the poorestperforming x% of the portfolio (as measured by % of
deals). The PERACS Risk
Coefficient expresses the
skewedness of returns from
0 (perfectly uniform) to 1
(perfectly concentrated
Alpha).
80%
Gini Coefficient: 0.88
60%
38
40%
20%
0%
-20%
Metric 4a
Strategic Positioning
7.5%
7.5%
-40%
0%
20%
40%
60%
80%
100%
Metric 3
PERACS Value Driver Bridge
42
-5.8%
4.1%
-6.8%
1.1%
100.0%
The PERACS Value Driver

Bridge shows the percentage of total PERACS Alpha
attributable to different
drivers of performance.
Metric 4c
Strategic Consistency
47.7%
100%
83.9%
48.0%
1.2%
The Procyclicality Score

measures the correlation in
the timing of investments of
Fund C
one given fund and the
Most Procyclical Quartile
Fund Score
Max Relevant
Competitor
Score
aggregate
of all
PE funds.
80%
Fund A
60%
Fund B
Second Most
Procyclical Quartile
Third Most
43
Least Procyclical Quartile
9.7%
Focal Procyclicality
FX
Total
Effect PERACS Alpha
= 30.7%
4.1%
The Strategic overlap score

measures the degree of
similarity in the investment
characteristics of one given
fund and the aggregate of
all PE funds.
0.4%
40%
This is an assessment of the
difference in investment
characteristics between the
20%
investment made in the last
5 years and those made in
0%
the last 6 to 10 years.
100.0%
Revenue Margin Multiple DeEffect

Effect
Effect leverage
Effect
Metric 4b
Investment Timing

60.9%
The Relevant Peers

aggregate performance of
best available purchased
imperfections).
48.0%
Relevant Competitor
Procyclicality
44
39
Country
Size
Industry
Combined
Consistency Consistency Consistency Consistency
45
PERACS Numbers Speak Louder than words

Metric 1c
Components of PERACS Alpha
Metric 2
Relevant Peer TVPI Benchmark
7.6%
30.7%
6.5%
15.7%
Delevered
Alpha
0.9%
Sector
Choice
Effect
Replicable Unique PE
Leverage Leverage
Eff
Eff
PERACS
Alpha
PERACS Alpha can be driven by

a (a) choice of an industry
sector or geography in which
also public companies outperform the MSCI world index,
(b) by a fundamental outperformance of the acquired
business(es) over their publicly
traded peers (the delivered
PERACS Alpha) net of any
differences in leverage, or (c)
by leverage. This distinguishes
between the replicable effect
of incremental leverage on the
performance of the publicly
traded peers and the unique
effect of incremental leverage
on the delivered alpha.
3.3x
2.5x
2.2x
2.1x
2.4x
1.4x
Fund A
Fund B
Focal Fund TVPI
The Relevant Peers

aggregate performance of
best available purchased
imperfections).
Fund C
Relevant Peer Benchmark TVPI
38
"The breakdown of our PERACS Alpha shows

that our outperformance over the public
markets is largely due to fundamental value
creation and not to sector choice or
leverage."
"Our unique deal making approach

translates into an ability to time deals
independently from deal volume for other PE
investors, including our closest competitors."
Metric 4b
Investment Timing
80%
Most Procyclical Quartile
60%
20%
"As you can see from the PERACS Risk

Curve, our returns are much more balanced
than the industry benchmark."

100%
The Procyclicality Score

measures the correlation in
the timing of investments of
one given fund and the
aggregate of all PE funds.
The PERACS Risk Curve

illustrates the portion of the
cumulative PERACS Alpha
generated by the poorestperforming x% of the portfolio (as measured by % of
deals). The PERACS Risk
Coefficient expresses the
skewedness of returns from
0 (perfectly uniform) to 1
(perfectly concentrated
Alpha).
80%
Gini Coefficient: 0.88
60%
Second Most
Third Most
40%
"PERACS identified our closest competitors

based on an analysis of the similarity in the
acquired entities. The strong aggregate
performance of these "relevant peers"
demonstrates the attractiveness of the type
of deals we make and we are proud to outperform that benchmark of the aggregate
"relevant competitor" for all of our funds."
Metric 5a
Lorenz Curve by % of Deals

100%
41
40%
20%
0%
Least Procyclical Quartile
9.7%
-20%
0%
-40%
Focal Procyclicality
Relevant Competitor
Procyclicality
0%
44
20%
40%
60%
80%
100%
42
Further Examples from Actual PERACS clients available upon request

5
Milestones of the establishment of PERACS as the

World Standard for Advanced PE Track Record Analytics
February 2015
February 2014
January 2014
Winter 2012/2013
1000th fund analyzed on behalf of LP Clients, PERACS GP Client-announced Fund Closings exceed USD
70B, PERACS Performance Metrics available on Bloomberg Terminal, first GP Client engagements in
Mezzanine, VC, Emerging Market PE
"LP Champion" projects set up with LPs of all types, from fund-of-funds, over Sovereign Wealth investors to
insurance companies, public and private pension funds, university endowments and family offices from
basically all relevant parts of the world
PERACS Client-announced Fund Closings exceed USD 55B
Research Project ILPA-CA-HEC, leveraging PERACS methods
Spring 2013
"LP Champion" Initiative launched, supporting LPs with risk/return analysis of existing portfolio and in fund
due diligence
January 2013
20% of Fundraising GPs (buyouts in EU and US, by volume target fund size) use
PERACS numbers
Summer 2012
First PERACS Client Work Performed
Spring 2012
Winter 2011/12
2011
2000 - 2010
Exploratory Conversations with leading GP and LPs

Design of Standardized Metrics, Value Proposition and Business Model
Exploratory Consulting Engagements with three of the Worlds 50 Largest GPs
10 years of applied research, developer of Wall Street Journal PE Rankings, consulting engagements
6
Agenda
PE flourishes, but what lies ahead ?
Assessing the general riskiness of PE new insights

Measuring risk attributes of specific PE Portfolios
Comparing the risk profile of individual GPs
Conclusions
Private Equity is back strong!

Record Distributions, Record Deal Flow, Strong Fundraising and ample evidence of
the ability of the asset class to deliver strong returns in recent academic work.
Author
Dataset
# of Funds Studied
Finding
Harris et al. 2013
Burgiss
598 US Buyout Funds

pre 2009
PE funds from this

sample outperform
broad stock market
Gottschalg 2014
ILPA-Cambridge
819 Buyout Funds

pre 2009
PE funds from this

sample outperform
broad stock market
Gottschalg 2014
Preqin CF Data
618 Buyouts Funds

pre 2009
PE funds from this

sample outperform
broad stock market
Gottschalg 2015
PEVARA
983 Buyouts Funds

pre 2009
Working Paper available upon request from gottschalg@hec.fr
PE Delivers Alpha during difficult

economic times
Alpha
5.1%
2.7%
-2.4%
Market
Returns
Alpha
Absolute
Rate of Return
Five-Year Joint Research Effort with Golding Capital Partners demonstrates

PEs strength in delivering Alpha in Downturn with impressive relative returns
to recent Crisis Deals
Presented at Super Return International Berlin 2013, available for download at www.peracs.com
Still, the future remains uncertain

What we hear from our LP clients:
Current deals are (too?) expensive
Current deals are (too?) aggressively financed
The Macro context can introduce substantial economic volatility
So it seems timely to draw attention to the other dimension of
performance: Risk and look at three fundamental questions that
LPs need to understand
How risky is PE overall?
What are the risk attributes of my specific PE portfolio?
How much risk will a given GP add to my portfolio?
10
Agenda

Conclusions
11
Consideration of Risk in PE
Typical Approach : Top Down based on aggregate times series data
1 Use of listed PE Proxies (e.g. LPX50, as used for Solvency II/QIS Studies)
Challenges:
Listed Private Equity vehicles are not necessarily representative for typical unlisted PE, which
leads to possible overstatement of volatility and correlation
2 Use of times series performance data from Private Equity Funds (e.g. Thomson One, Preqin)
Challenges :
Autocorrelation of performance data needs to be eliminated
Available databases consist largely of rather old funds (15+ years) for which NAVs were not
systematically marked to market as they are today
Generally aggregate treatment of vintage years
No consideration of individual transactions and hence no specific treatment of different
investment years, industry segments or deal sizes
Existing Methods provide limited insights into risk-return relationship and are
unsuitable to assess/compare riskiness of different fund managers and strategies
12
Combining powerful bottom-up

methodology with unique and granular data
Monte-Carlo Simulation of Deal-Level Return Pattern of PE Investments
Method developed jointly with Dr. Kreuter from Palladio
Partners, (cf Quantitative Assessment of PE Risks, PETJ
Q1 2013) considers observed deal-level evolution of NAV
and CF from year to year to build bottom-up value-at-risk
model for single deals and at the portfolio level.
Comprehensive data on French PE Industry (2nd largest PE market in Europe)
Confidential data collected by French PE Industry Association

(AFIC) from members in multi-year data gathering effort
6,223 transactions, since 2000, 30B EUR Equity Invested
Detailed information (all CFs and annual NAV from 2006 to 2013)
3,400 deals (10B Equity Invested EUR) made since 2006 with
complete information, i.e. all CFs and NAV information fron
inception until year-end 2013
First-ever assessment of Value-at-Risk for PE based on a census of deal activity in

major PE market using detailed times-series covering GFC period
13
The methodology in a nutshell

How to measure the risk of capital loss for investors in PE ?
In line with the approach recommended by regulators, we calculate the maximum amount of capital that
investors expect to lose for a given portfolio in a given worst case scenario.
This maximum loss is called Value-at-Risk (VaR) and expressed as a percentage of the amount invested at
the beginning of the period.
For example, the 99.5% VaR corresponds to the scenario of a worst case, equivalent to the 0.5% worst
simulated outcomes. When we simulate 1000 possible scenarios for a given portfolio, the maximum capital
loss in the worst 5 cases is the 99.5% VaR value.
If this 99.5% VaR was XXX%, the interpretation would be as follows: With 99.5% certainty, investors in this
portfolio can expect to lose no more than XXX% of the amount invested at the beginning of the period
Portfolio-specific Risk Assessment based on bottom-up approach
From the 3,400 complete deals in the sample, we derive 13,000 movements of CF/NAF from year-to-year
We assign these movements to specific deal characteristics, such as
Investment stage (venture capital, growth capital, LBO, turnaround)

Industry sector of acquired business,
Number of years in the portfolio (age),
Performance to-date (classified in terciles: high, medium or low Performance).
Using the Gottschalg&Kreuter approach we model the year-on-year VaR for PE portfolios with various
characteristics based on the conditional probabilities of movements for each of the underlying
investments, given specific deal characteristics (stage, industry, age, size, performance to-date).
14
Illustrative Example Single Deal

1,000 Random Draws of Possible Year-End Outcomes
based on year-on-year Movements observed in actual data
on PE industry for deals with same characteristics
(stage, industry, age, performance to-date)
Buyout Investment
Consumer Goods Sector

Large Cap
3 Years Old
NAV in LP Portfolio
beginning of year:
EUR 14M
Performance to-date:
TVPI = 1.4x (Best Performance
Tercile)
TVPI at year end:

2.4
2.3
1.9
1.8
...
...
...
...
...
...
...
...
...
...
...
...
0.3
0.28
0.1
0
0
0
99.5% VaR Cut-Off TVPI 0.28x

= 80% of Initial NAV at risk
( EUR 11.2M at risk)
With 99.5% certainty, investors in this deal can expect to lose no more than
80% of the amount invested at the beginning of the period OR
There is a 0.5% risk to lose 80% or more of the investment in this deal
15
Illustrative Example Fund with 10 deals

1,000 Random Draws of Possible Year-End Outcomes for each deal
Buyout Fund, 10 investments
Deals made 2 and 3 years ago

40% in consumer goods,
60% in Industrial
All small cap
Current TVPI tercile category
known for each deal
NAV in LP Portfolio beginning of
year: EUR 25M
Portfolio TVPI = 1.22x
Portfolio NAV = EUR 35M
1,000 simulated TVPIs

across all deals at year end:
2.4
2.3
1.9
1.8
...
...
...
...
...
...
...
...
...
...
...
...
0.7
0.61
0.5
0.4
0.4
0.2

16
Illustrative Example Fund with 10 deals

Buyout Fund, 10 investments
Deals made 2 and 3 years ago

40% in consumer goods,
60% in Industrial
All small cap
Current TVPI tercile category
known for each deal
NAV in LP Portfolio beginning of
year: EUR 25M
Portfolio TVPI = 1.22x
Portfolio NAV = EUR 35M

2.4
2.3
1.9
1.8
...
...
...
...
...
...
...
...
...
...
...
...
0.7
0.61
0.5
0.4
0.4
0.2

17
Monte Carlo Simulation Results: VaR of

French Buyouts for Different Portfolio Sizes
While single deals are inherently risky., VaR descreases rapidly with the number of underlying
assets. For a portfolio made up of 100 French LBO investments (corresponding to 10 primary funds
or one fund of funds), investors can expect with 99.5% likelihood to lose no more than 14% of their
capital.
99.5% VaR over years 2 to 6
based on 1,000 simulated cases for each size of the portfolio
100%
100%
99.5% VaR
75%
58%
50%
45%
40%
25%
14%
0%
1 deal
10 deals
20 deals
40 deals
100 deals
18
Monte Carlo Simulation Results: VaR of

different PE stages by Portfolio Size
Results confirm intuitive Risk Patters across different stages, while for all stages VaR decreases
French Venture capital standard risk profile
rapidly with the number of underlying assets
French Growth capital standard risk profile
French LBO Market standard risk profile
100%
100%
85%
74%
99.5% VaR
75%
67%
55%
58%
50%
51%
45%
51%
40%
25%
28%
25%
14%
0%
1 deal
10 deals
20 deals
40 deals
100 deals
For all stages, the estimated 99.5% VaR for a portfolio of 100 underling investments is
substantially lower than the implied value of the current regulatory treatment for PE (39%)
19
Insights from bottom-up Monte-Carlo

Simulation of Value-at-Risk
Conservative estimate of VaR in PE based on Census of times-series data from
French PE industry 2006 to 2013 reveals that:
In line with expectations, the VaR is greater for early stage VC, followed by
late stage VC/Growth Capital, while BOs have the lowest VaR in comparison
Individual PE deals are inherently risky
VaR in PE rapidly decreases for larger and more diversified portfolio
For a typical (reasonably diversified) investor, the estimated VaR lies

substantially below the level implied by current regulation (39%)
20
Agenda

Conclusions
21
Monte-Carlo Simulation of Value-at-Risk

for specific PE Portfolios
Portfolio By Stage
Portfolio By Sector
100%
23%
36%
100%
22%
Growth Capital
39%
41%
39%
Investment volume
Count
Portfolio By Size
IT
Comm
53%
50%
Investment volume
Count
18%
12%
18%
31%
35%
15%
43%
Mid
Small
Investment volume
50%
Portfolio By Age
100%
60%
47%
VC
Buyout
40%
Generic Example
5 Year
4 Year
3 Year
57%
Count
100%
36%
35%
Investment volume
Count
2 Year
For any given PE portfolio with given characteristics deal-by-deal (age, industry,
stage, size, performance to-date), the exact VaR can be estimated based on observed
movements of PE deals evolving across time from AFIC-type database.
22
Simulation of VaR for specific PE Portfolio

Generic Example

x
x
x
X
...
...
...
...
...
...
...
...
...
...
...
...
...
Y
Y
Y
Y
Y
99.5% VaR Cut-Off
This approach enables LPs to estimate their specific VaR given portfolio
characteristics to accurately consider risk attributes of PE portfolio in calibration
of capital reserves.
23
Agenda

Conclusions
24
A Concept for Measuring Risk:

The PERACS Portfolio Risk Curve
Inspired by Lorenz curve in Macroeconomics
Approach used to assess Income Inequality across countries
Cumulative Income Share
100
Similar to the 'Gini Coefficient' for

wealth distribution, we capture the
distribution of performance in a single
measure, the 'PERACS Risk Coefficient',
which makes it possible to compare and
benchmark the risk of different PE
portfolios in a measure that is
independent of the performance of
these portfolios. The 'PERACS Risk
Coefficient' measures the area
underneath a given risk curve relative to
the area underneath the diagonal line at
a 45 degree angle.
80
60
40
20
0
0
20
40
60
80
100
Cumulative Population Share

Brazil
China
Perfect
25
The "PERACS Investment Risk Curve" of a

Typical PE Fund
Generic Example
Insight
Overall assessment
of the distribution
(uniform vs. exponential) of returns
in the portfolio as a
new risk measure
for PE portfolios.
100%
60%
Alpha Contributors
40%
Alpha Drags
20%
0%
Benchmarking
Comparison with
average performance distribution
from HEC PE
database, based on
different portfolio
characteristics.
Break Even
Point
Vertex
77
73
69
65
61
57
53
49
45
41
37
33
29
25
21
17
13
-20%
1
% of value creation
80%
Number of transactions
26
PERACS Investment Risk Curve

by % of Deals
Real-World
Client Example
Doughty Hanson & Co Aggregate (Fund IV + V) PERACS Risk Coefficient

100%
0.90
0.91
0.61
Benchmark EU
80%
Since 2005 Large-Cap
60%
DH
40%
20%
0%
-20%
-40%
-60%
0%
20%
40%
60%
80%
100%
0.5
The PERACS Investment Risk Curve illustrates the portion of the cumulative PERACS Alpha generated by the poorest-performing x% of the portfolio (as
measured by % of deals). The PERACS Risk Coefficient expresses the skewedness of returns from 0 (perfectly uniform) to 1 (perfectly concentrated Alpha).
1
27
PERACS Investment Risk Curve

by % of Deals
Nordic Capital Fund V versus Fund VI
Real-World
Client Example
PERACS Risk Coefficient
100%
0.90
0.91
0.59
0.45
Benchmark EU
80%
Since 2005 Large-Cap
60%
Nordic Capital Fund V
40%
Nordic Capital Fund VI
20%
0%
-20%
-40%
-60%
0%
20%
40%
60%
80%
100%
0.5
The PERACS Investment Risk Curve illustrates the portion of the cumulative PERACS Alpha generated by the poorest-performing x% of the portfolio (as
measured by % of deals). The PERACS Risk Coefficient expresses the skewedness of returns from 0 (perfectly uniform) to 1 (perfectly concentrated Alpha).
1
28
Risk and Return distribution across sample

of GPs
PERACS Risk Coefficient
Across 152 PE GPs with > 9 realized deals in Track record

1.1
1.0
0.9
0.8
0.7
0.6
High Alpha,
Low risk GPs
0.5
0.4
-0.1
0.0
0.1
0.2
0.3
Aggregate PERACS Alpha
0.4
0.5
0.6
Presented at Super Return International Berlin 2014, available for download at www.peracs.com
29
Agenda

Conclusions
30
Conclusions
PE can deliver outperformance, in particular in difficult times
The probability of loosing the capital invested decreases more than
proportionally with increasing portfolio size
The VaR is greater for early stage VC, followed by late stage
VC/Growth Capital, while BOs have the lowest VaR in comparison
For a typical and reasonably diversified investor, the estimated VaR
lies substantially below the level implied by current regulation (39%)
This should open up the asset class for investors until today limited to
invest by restrictive regulation
31
Thank you for your attention !
32
About Professor Oliver Gottschalg

Current Positions
Education
Director of the HEC PE Observatory
Dipl. Wirtschaftsingenieur (TU Karlsruhe)
Academic Dean of the TRIUM

Global Executive MBA Program
MBA (Georgia State University)
Founder and Head of Research,

PERACS PE Track Record Analytics
Ph.D. (INSEAD)
Research
Published in the Review of Financial Studies, Harvard Business
Review, Academy of Management Review, Strategic
Management Journal, Journal of Banking and Finance, etc.
Featured over 100 times in the business media (press, radio,
TV and online) in the past 2 years, including The Economist,
Financial Times, Wall Street Journal, Financial News, Les Echos,
etc.
Consulting
Tailored projects for leading sponsors, institutional investors
and advisors. Repeatedly served as advisor to policy makers at
the national and European level in questions related to the
possible regulation of private equity.
MSc. of Management (INSEAD)
Work Experience
Federal Reserve Bank, US
Bain & Company Private Equity Practice
Teaching
HEC Grande Ecole Program
HEC Executive Education
Harvard Executive Education
TRIUM Global EMBA Program
INSEAD Executive Education
LBS Executive Education
Tsinghua University Executive Education
Company-Specific Executive Programs
33
About PERACS
PERACS is not just another performance benchmark, but it provides
customized and insightful metrics to quantify relevant elements of past
performance, risk attributes and strategic differentiators
Independent, credible, trustworthy, global, conflict-free, and singularly
focused
Granular analysis built up from company by company portfolio analysis
Formulaic and transparent. Trusted standardized comparisons
Dynamic quarterly updates and annual reviews
Methodology of leading industry academics and investors
Value added service provided by GPs to their LPs
Used in GP marketing materials with success
PERACS: The Global Standard for PE Performance Analytics

34
PERACS in the ILPA Newsletter
35
Diverse Senior Team Delivers Innovative Services
Exceptional access to applied research and experienced investing professionals
Client focused senior professionals based in Europe and North America
Deep analytic resources
In-house systems development
PERACS Founder and Head of Research; senior strategic consultant to global

Oliver
Gottschalg corporations; Head of the Private Equity Observatory at HEC Paris; Academic Dean of
TRIUM Global Executive MBA Program; leading private equity researcher
Gerry
Flintoft
Extensive track record with oversight of PE at the $50 billion LACERA pension plan;
Director of Alternatives with PineBridge (formerly AIG Investments); advised clients on
portfolio construction, emerging markets, private credit, and hedge fund seeding; ILPA
Board Member and Chartered Alternative Investment Analyst (CAIA)
Peter
Mayrl
18 years of experience in European PE, both on the direct side (Permira, Lyceum) and
on the FoFs side (Allianz, Idinvest); experience in strategic consulting at Bain & Co
Fernando
Vazquez
Co-Founder of Conversus listed PE fund; MD and investment committee member of

Bank of Americas PE fund business; corporate finance and banking experience in
developed and emerging markets; ILPA Research Chair and CFA
36
Industry Leading Advisory Board

John Breen
Chairman of the PERACS Advisory Board, Head of Private Investments &

Investment Committee Member Sanabil Investments, Saudi Arabian Investment
Company; Former Head of Funds and Secondaries, Canada Pension Plan Investment
Board (CPPIB); former Vice Chairman Institutional Limited Partners Association
Thomas C Franco
Partner with Clayton, Dubilier & Rice, LLC
Jeff Gendel
Managing Director at Gen II Fund Services, LLC
John Higgins
Managing Director of the Americas, PEI Media
Kathy Jeramaz-Larson
Executive Director of the Institutional Limited Partners Association (ILPA)
Andrea Lowe
Chief Executive of LPEQ, the Listed Private Equity Association
Stephen Marquardt
CEO of Doughty Hanson & Co
Spencer Miller
Managing Director and Head of London Office of OPTrust Private Markets Group
Tom Rotherham
Formerly Director Head of Private Markets BTPS/ Hermes Equity Ownership

Services Limited
Sheryl Schwartz
Managing Director, Caspian Private Equity
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SR Berlin 2015 - Let Talk About Risk

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SR Berlin 2015 - Let Talk About Risk

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Lets talk about Risk !

New Approaches to bring Risk into the

Bigger Picture: Challenges with Data and Measures

"We are a Top Quartile

"Our value creation is

makes LPs wonder how to spot true

A possible Answer: The Suite of PERACS Analytics

Mega Partners, LLC - Aggregate

Mega Partners, LLC - Aggregate

Benchmark represents the

industry benchmarks ( that

The Relevant Peers

Focal Fund IRR

Relevant Peer Benchmark IRR

PERACS Alpha can be driven by

Focal Fund TVPI

Relevant Peer Benchmark TVPI

Mega Partners, LLC - Aggregate

The PERACS Risk Curve

The PERACS Value Driver

The Procyclicality Score

Least Procyclical Quartile

The Strategic overlap score

Revenue Margin Multiple DeEffect

Mega Partners, LLC - Aggregate

The Relevant Peers

PERACS Numbers Speak Louder than words

Mega Partners, LLC - Aggregate

Mega Partners, LLC - Aggregate

PERACS Alpha can be driven by

Focal Fund TVPI

The Relevant Peers

Relevant Peer Benchmark TVPI

"The breakdown of our PERACS Alpha shows

"Our unique deal making approach

"As you can see from the PERACS Risk

Mega Partners, LLC - Aggregate

The Procyclicality Score

The PERACS Risk Curve

"PERACS identified our closest competitors

Mega Partners, LLC - Aggregate

Least Procyclical Quartile

Further Examples from Actual PERACS clients available upon request

Milestones of the establishment of PERACS as the

First PERACS Client Work Performed

Exploratory Conversations with leading GP and LPs

Assessing the general riskiness of PE new insights

Private Equity is back strong!

Harris et al. 2013

598 US Buyout Funds

PE funds from this

819 Buyout Funds

PE funds from this

618 Buyouts Funds

PE funds from this

983 Buyouts Funds

Working Paper available upon request from gottschalg@hec.fr

PE Delivers Alpha during difficult

Five-Year Joint Research Effort with Golding Capital Partners demonstrates

Still, the future remains uncertain

Assessing the general riskiness of PE new insights

Combining powerful bottom-up

Comprehensive data on French PE Industry (2nd largest PE market in Europe)