MJ Hudson recently acquired Oliver Gottschalg’s fund performance analytics firm PERACS. You can read more about it here.
It is the first time I have encountered someone that can distil alpha down into something a lot more useful and understandable. He takes out the market bias, the sector bias, and normalizes leverage. This allows a PE manager the opportunity to showcase a more genuine form of outperformance.
Oliver and his team’s ability to demonstrate the extent in which a PE firm improves margins and multiples on a deal by deal, portfolio by portfolio, basis is also incredibly useful. After reviewing these analytics, IRR seems entirely inadequate.
Many PE firms say that they are niche. Oliver can prove if you are or are not. This is powerful because niche strategies tend to outperform those that are mainstream. And beware, a lot of people that say they are niche, aren’t.
Finally, Oliver’s risk analysis is hugely helpful. Is your performance a result of one good deal and a lot of average deals; how many deals were a lag on performance, versus winners; if you look at all the deals you did, when did you breakeven; how deep were your losses; how long did it take you to recover; etc. The information is rich and deep.
If you are a buyout PE manager and looking for ways to differentiate yourself from your peer group, you will be impressed with Oliver’s work.