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Evaluation and Critique of Existing Portfolios

Private equity investments are most appropriate for investors with a long time horizon. Periodically it is necessary to perform a portfolio diagnostic analysis to assess the private equity portfolio’s current composition and monitor its progress towards its predetermined investment objectives.

Alignment Capital Group performs comprehensive portfolio critiques to provide investors an objective opinion on the status of their private equity portfolio. From the information gathered in this analysis, ACG recommends a course of action to keep the portfolio on track (or recommends corrective action, if necessary).

ACG has developed proprietary tools to diagnose several aspects of private equity portfolios as a whole, including:

• “Beta,” or exposure to the public market, and the overall risk of the portfolio, including its correlation with the public market, using proprietary OCOM plot analysis
• Degree of diversification among partnerships in the portfolio
• Degree of vintage year diversification
• Deviation and expected future deviation from target asset allocation (% of private equity in the whole portfolio)
• Deviation and expected future deviation from target sub-asset allocation (% of venture capital, buyouts, etc.)
• Total return benchmarks versus the public markets and the peer group
• Cash flow benchmarks versus historical averages and the current peer group
• Proprietary performance attribution analysis (base return, selection return and timing return)
• Overall quality of the investment process

For the client, the result is an objective and honest third-party appraisal of the private equity portfolio and a set of concrete recommendations to emphasize the strengths in a program and to address any shortcomings.

Example: Portfolio Evaluation and Critique