Gottschalg Analytics: Looking Beyond DPI

How to detect GP skill (even in in largely unrealized portfolios)?

The Problem We Are Solving

These days, many if not most PE Fund Managers aim to raise a new funds, when not only the most recent, but the two most recent funds show little to no DPI. This raises the question of how LPs can detect GP skill (and how GPs can credibly signal that they possess such skill) absent meaningful tangible cash returns from the past few years of investment activity.

Solutions

At Gottschalg Analytics, we take pride in our ability to objectively measure and benchmark not only the how but also the how much of value creation. This positions us well to provide data-driven insights into the specific skillset of a PE Fund manager based on factors other than cash distributed. Specifically, our analytics can shed light on factors such as:

1. Does the Value Driver Evolution of unrealized deals substantiate NAVs?

2. Does the Value Driver Evolution of unrealized deals reflect value-add?

3. Does recent deal activity show proprietary deal flow and/or conviction?

4. Does recent exit activity reveal an ability to create liquidity events?

5. Are recent deals consistent with prior strategy?

6. Are recent deals likely to be affected by too much “money chasing deals”?

How It Works

The Gottschalg Analytics team has over 20 years of experience in analysing PE track records and worked for eight of the largest ten and 39 of the largest 100 PE houses worldwide.
To calculate indicators of skill from a largely unrealized portfolio, we require standardized data of the type that is typically shared by GPs with LPs in the fundraising process: fund-level net Cash Flows, deal-level gross Cash Flows, company financials at acquisition and at exit, as well as the key characteristics of each past investment and the proposed deal: industry sector, geography and enterprise value.
Based on this data, we perform a standardized and in-depth analysis of our six aspects of “GP Skill beyond DPI”

We provide a data-driven and objective answer to each of the six above questions, enabling GPs to demonstrate that also during the past years of delayed distributions the impact of their skillset is clearly visible in their track record.