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GP’s track record in downturns is correlated to future fund performance

Recent research conducted by Prof. Oliver Gottschalg, of HEC Paris, could help shed light on the attributes of general partners more likely to outperform in a downturn.

The research was based on an analysis of 12.500 buyouts executed between 1990 – 2015 by almost 200 GP’s to identify deals impacted by a difficult environment.

A quick overview:

  • A GP’s track record during an economic downturn is correlated to success and failure of a future fund for that GP.
  • In his research, Prof. Gottschalg found that over a third of all realised PE deals had downturn features. In two thirds of these deals, the GP achieved success at exit, he named these “downturn successes”.
  • Gottschalg’s assigned a ‘downturn success ratio’ which is the degree to which a fund manager experienced downturn deals in the past and how frequently these deals still had successful outcomes.
  • Key findings were that GPs with high past downturn success ratios are most likely to deal better with downturns in the next fund.

Source: PEI


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