A study published today by global private equity, infrastructure and real assets investor, Pantheon, found that sales growth proved to be the main driver of value – alpha – in its analysis of private equity value creation.

Using a unique proprietary dataset1 of 450 realized private equity deals and comparing these to portfolios of public market comparables for sector and geography, and after adjusting for leverage, the study established that the sample deals not only created value for GPs’ investors, but for the wider economy, too. Furthermore, the sample deals delivered alpha throughout a market cycle, suggesting that skill not luck drove outperformance.

The analysis first dissected the traditional method of using the ‘value bridge’ to attribute value contribution in private equity deals and found that, in fact, this method does not measure value creation. We instead took an original approach that allowed us to look through the absolute performance numbers to reveal the true economic value added by a GP. This methodology determined that the sample deals delivered 9.8% of gross alpha per annum. And it identified sales growth as the primary driver of that outperformance.

Applying our original methodology enabled us to attribute 32% of returns to leverage, 30% to the sector / geography factors and 38% to alpha generated by the GP – equating to 9.8 percentage points of alpha per annum.

We believe these findings highlight that portfolios – especially those with a long-term objective – may benefit from an allocation to an asset class such as private equity that can potentially deliver robust risk-adjusted outperformance throughout a business cycle.

“The results surprised us,” commented the study’s author, Dr. Ian Roberts, at Pantheon. “Traditionally, it has been suggested that it is low growth companies or companies focused on downsizing that are the ideal candidates for the LBO model. Instead, our results suggested that concentrated equity ownership afforded by the private equity model allowed our GPs to apply their skillset and reap the benefits of efficient corporate governance, and so deliver sales growth as well as multiple expansion in excess of publicly-listed comparables. In this way, these GPs have created value not just for their investors, but also for the broader economy.

“Finally, our analysis demonstrated that even though every vintage in our 2001-2010 time period experienced market volatility, our sample deals steadily delivered value creation versus public markets throughout. In our view, this value creation throughout the cycle indicated skill rather than luck.”


Please click here to view the study: “Value Creation and the Business Cycle”, or visit www.pantheon.com




1 The 450 sample deals were classed as realized (where generally at least 80% of the value of the deal will have been realized as cash or in-specie distributions); are from direct private equity funds with a geographic focus on North America or Europe; were entered during the period 2001 to 2010; were composed of buyouts (82%), special situations (14%) and growth equity (4%)

Past performance is not indicative of future results. Future returns are not guaranteed and loss of principal may occur.



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Notes to Editors


Pantheon is a leading global private equity fund investor that invests on behalf of over 380 individual institutional investors, including public and private pension plans, insurance companies, endowments and foundations. Founded over 30 years ago, Pantheon has developed an established reputation in primary and secondary private asset solutions across all stages and geographies. Our investment solutions include customized separate account programs, regional primary fund programs, secondaries, co-investment and infrastructure programs. Pantheon also has private equity solutions for private wealth and defined contribution clients.

As at March 31, 2015, Pantheon had $30.8 billion assets under management* and we currently have over 197 employees, including 70 investment professionals, located across our offices in London, San Francisco, New York, Hong Kong, Seoul and Bogotá.

Pantheon is owned by Affiliated Managers Group Inc (“AMG”), alongside senior members of the Pantheon team. AMG is an NYSE-listed asset management company with equity investments in leading boutique investment management firms. The ownership structure, with Pantheon management owning a meaningful share of the equity in the business, provides a framework for long-term succession and enables Pantheon management to continue to direct the firm’s day-to-day operations.

* This figure includes assets subject to discretionary or non-discretionary management, advice or those limited to a reporting function.

This press release is not an offer of securities for sale in the United States. Securities may not be offered or sold in the United States absent registration or an exemption from registration.

For more information, go to www.pantheon.com.

Contact Pantheon:



Amanda McCrystal, Principal, Global Head of Marketing and Communications

Tel:       +44 207 484 6200

Email:   amanda.mccrystal@pantheon.com