‘Top Quartile’ GPs – So How Is Top Quartile Private Equity Performance Determined?
| Jan 9th, 2012 | Filed under: Private Equity, Today's Post | By: Guest |
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By Irina Zeltser
In private equity investing it is often said that, if you add up all the top quartile performing funds, you would have nobody left to represent the other quartiles. GP managers proudly claim “Top Quartile” performance in marketing material, annual meetings, press releases, and road shows, as a way to assure investors that all is well. Of course, this has been a complaint for years and, while valid, the purpose of this article is to understand the drivers and solutions to this phenomenon.
There are two key factors at play when determining whether a fund is “top quartile” – whether performance is evaluated across all relevant performance characteristics and whether this performance is measured relative to the appropriate peer group. For manager rankings, it is also important to understand the volatility of performance across all funds. It is consistency of performance and relevance of assessment that separates the true top from the posers.
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