Competencies, Clusters, and Star Performance at a Leading PE Firm

Competencies, Clusters, and Star Performance at a Leading PE Firm

Authors

  • Avi Turetsky

Published

Journal of Private Equity, 4 ed., vol. 19, pp. 19-34, October (4th Quarter/Autumn) 2016

Website

http:// dx.doi.org/10.3905/jpe.2016.19.4.019

Abstract

Using the real-world laboratory of one leading private equity (PE) firm, the author attempts to directly connect professional competencies to performance outcomes and, more specifically, to skewed performance distributions. Although no published studies focus on the shape of PE return distributions, data presented in multiple studies indicate that returns are right-skewed at the level of funds and of individual portfolio company investments. At both levels, a small percentage of actors drive an outsized portion of returns. This article finds that professionals who lead outperforming investments tend to excel in three different clusters of competencies and related style elements (identifiable behaviors that may be based on groups of competencies). They display more robust and varied toolkits within each cluster than do professionals who lead underperformers, and these mixes of competencies contribute to investment outcomes in identifiable ways.