Demystifying Private Equity

Your roadmap to PE

Private equity industry trends


AuM as of June 2019. 2


Capital distributed by fund manager to investors in 2017. 1


Of PE investors plan to increase or maintain their commitment in the longer term. 2

Sources: 1Preqin Alternatives in 2019 2Preqin Alternatives in 2020 Report

Top performing institutional investors are allocated 40% to private investments

According to latest research conducted by Cambridge Associates3, top decile performing institutional investors have increased their private investments* allocations to a mean of 40%.

Private investment allocations

20% 1998
40% 2018


University 4



Of Texas 5



University 6



University 7

Private Investments*

*Private investments include non-venture private equity, venture capital, distressed securities (private equity structure), private real estate, private oil & gas/natural resources, timber, and other private investments.

Sources: 3Cambridge Associates Research Report February 2019 4Princeton University 5University of Texas 6Columbia University 7Yale News


According to Cambridge Associate's endowment and foundation research, the average annualized return for a greater than 15% allocation was 8.1%, 160 basis points higher than the group with less than 5% allocation.

20 year Average Return (%)

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Private equity allocations under 5%

Private equity allocations between 5% and 15%

Private equity allocations over 15%

20 years Average Private Investment Allocations (%)

Analysis includes 132 endowments and foundations that provided returns and beginning-year asset allocation for each June 30 from 1998 to 2018. Subgroups are based on each institution's 20-year average allocation to private investments. Solid lines are drawn where the median private investments allocation for the entire universe intersects with the median return for the entire universe.

*Private investments include non-venture private equity, venture capital, distressed security (private equity structure), private real estate, private oil & gas/natural resources, timber, and other investments. Endowment and foundation data as reported by Cambridge Associates LLC. Graphs are for illustrative purposes only.

Source: Cambridge Associates Research Report February 2019

Manager Selection Matters, Especially in VC and PE

Private and Public Manager Dispersion

Based on returns over a 10-year window

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Sources: Lipper, NCREIF, Cambridge Associates, HFRI, J.P. Morgan Asset Management.

Global equities (large cap) and global bonds dispersion are based on the world large stock and world bond categories, respectively. “Manager dispersion is based on: 4Q 2009 - 4Q 2019 annual returns for global equities, global bonds, U.S. core real estate and hedge funds. U.S. non-core real estate, global private equity and U.S. venture capital are represented by the 10-year horizon internal rate of return (IRR) ending Q4 2019.

Data is based on availability as of May 31, 2020.

Source: JPM Guide to Alternatives Q2, 2020

The Big funds are getting bigger


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Source: Pitchbook. Private Fund Strategies Report. Q2 2020. | Geography: Global

*As of June 30, 2020

The Private Company Universe

The private company universe is significantly larger than the shrinking public company universe, creating a host of opportunities.


of businesses with ≥ $10M in sales are not publicly traded in the USA


decline in the number of US publicly traded companies since the 1997 peak


Numbers of US private companies



Numbers of US public companies

Source: Vanguard

The majority of a company's growth occurs in a private format

Technology companies are increasingly reaching $10Bn in value pre-IPO.

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Global Company Coverage - At Every Stage in the Lifecycle

CrystalResearch™. Vista Equity Partners Fund VII. Opportunities Set

Demystifying common misconceptions


Single deal flow or a single manager approach is a recipe for disaster. Proper diversification greatly reduces the risk of permanent loss of capital.

With only 1 fund the likelihood of a sub-1.0x TVPI was 24%

The likelihood drops less than 5% with a portfolio of 5 funds

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Source: Cambridge Associates Research Report February 2019


Laddered consistently and periodically over 5 years (vintage diversification), a systematically designed PE portfolio should produce a staggered series of consistent cash flows and liquidity events for an investor, based on the assumptions* below.

Laddered Diversified PE Portfolio cash flows for $2.5M Total commitments.

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The cashflows in this graph are based on several assumptions, are for illustrative purposes only, and cannot be relied upon. The timing and amounts of actual cash flows can vary widely from this illustration and there is no guarantee of performance results.

*The assumptions are 1) $250K is invested every 6 months over 5 years in a new fund 2) each fund calls 1/3 of committed capital per year 3) the average weighted life of an invested dollar is 4.5 years 4) a 1.6 net MOIC was the assumed growth of each invested dollar.

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