Content from our parent company Bison

Now that you have chosen the methodology and index, it’s time to interpret the results. Whether it’s a peer benchmark or PME analysis, the important story to tell is not the snapshot (a single quarterly datapoint) but the trend. One year provides more context but we think a three-year view offers a clearer picture of how a fund or fund family is performing against the public markets.

In the above example, I plotted the North American All PE IRR against the Bison PME IRR for the Russell 3000 index. If I were a GP presenting this as my fund’s PME analysis, there are several key points that I would emphasize with LPs.

  • My fund is outperforming the public markets by 3.2% through Q3 2015.
  • My fund has averaged 3.1% PME alpha over the last three years.
  • The markets have had a strong run over the last few years but our fund’s PME alpha never dipped below 2%.

Read our white paper on PME

Wrapping Up

PME analysis is here to stay as an LP analysis tool. Whether a GP is fundraising or performing their quarterly investor relations responsibilities (quarterly reports and quarterly update calls with LPs), it is important for GP’s to be knowledgeable about PME. A good IR team should have the answers to the questions discussed above. More importantly, they will have a well-crafted message that emphasizes the fund’s strengths.

About Michael Roth, CFA

Michael is the VP of Research for Bison. He is responsible for overseeing the team that maintains and grows Bison’s transparent dataset and works as the R&D lead for the Cobalt GP product. Before Bison, Mike spent six years on the investment team at SVG Advisers. There, he conducted research and due diligence on buyout and venture capital funds in the Americas. Mike received his BA in Economics from Boston College and is a CFA Charterholder.

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