Private Equity Analytics

Traditional methods fail to accurately capture total performance and reliable risk measure. MJ Hudson Performance Analytics offers solutions and a new way forward for investors.

IRR and PME suffer inherent aberrations due to cash flow timing and reinvestment assumption.

Traditional IRR and Multiple measures no longer reliably identify performance persistence.

Variance- and beta-based measures struggle to provide meaningful PE risk insight:

  • MJ Hudson PERACS Alpha corrects issues with IRR methodology and incorporates stock-market opportunity cost
  • MJ Hudson PERACS Alpha effective in capturing persistence and may improve portfolio performance by up to 450 BPs p.a.
  • MJ Hudson PERACS Risk Curve and Coefficient complete the risk-reward perspective to be integrated in risk benchmarking and risk allocation

These flaws crystalize the need for a new track record evaluation paradigm.

Value Attribution methods are customized with long and complex explanation footnotes

Being Top Quartile by IRR in a given vintage year becomes less and less meaningful:

  • 1 in 5 funds mis-quartiled by IRR bias
  • Vintage year benchmarks often group funds with very different investment focus
  • Vintages do not account for reality of funds from consecutive vintages compete for similar deals
  • MJ Hudson PERACS Value Driver Bridge standardizes attribution analysis to identify how GPs generate Alpha through operational and financial drivers
  • MJ Hudson PERACS Relevant Peer Group provides objective benchmarking through algorithmic methods driven by actual deal activity for truer comparison across managers
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