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Platinum, Genstar, TSG head class of 2012 vintage fund all-stars

  • PE 2012 posted stellar recovery from global crisis
  • Top-quartile returns for vintage highest since 2003
  • Platinum, Genstar and TSG led performance

The year 2012 was stellar for private equity performance as the industry recovered from the global financial crisis and GPs deployed capital into a strengthening economy.

Top-quartile returns for vintage 2012 domestic buyout and turnaround funds reached 23.4 percent, the highest such performance in the Buyouts database since 2003. Platinum Equity, Genstar Capital and TSG Consumer Partners led that performance, turning in the best yields among 63 domestic buyout, growth, mezzanine and turnaround vintage-2012 funds in the Buyouts return database.

Platinum Equity’s third flagship placed first among 15 top-quartile funds measured by internal rate of return, Buyouts research showed. Platinum Equity Capital Partners III generated a 49.8 percent IRR as of year-end 2016 for one of its backers, Teachers’ Retirement System of the City of New York.

‘Disciplined’ about pricing

“Platinum’s investment performance is driven by many factors, including our ability to source and execute attractive buyside opportunities and a highly differentiated approach to value creation that we call M&A&O,” or mergers and acquisitions and operations, said Mark Barnhill, partner at Platinum. “It’s a very intensive, fully integrated operational approach. It rapidly transforms the companies we acquire by working with management teams to improve performance and grow the business.

“We have also remained disciplined in what has been a sustained period of high pricing in the buyouts market. We’re writing bigger checks these days, and we’re willing to pay a fair price for the opportunity to create value, but we have stayed disciplined and remained true to our model,” Barnhill said.

The No. 2 and 3 performers in the 2012 vintage both came from the LP portfolio of Colorado Public Employees’ Retirement Association. Genstar Capital Partners VI produced a 43.4 percent IRR, while TSG 6 churned out a 41 percent IRR.

Genstar’s success stems from some strong exits across all its verticals with Acrisure (insurance brokerage), eResearch Technologies (biopharma clinical services), ConstructConnect (construction networking platform), AssetMark (investment and financial advisement), and Tecomet (provider of complex manufacturing solutions).

For TSG, Managing Director Pierre LeComte credits the firm’s prosperity to its adeptness in the retail and consumer sectors, combining “above-average returns with discipline, with a low loss rate on individual investments.”

TSG’s sixth primary fund got great returns from its stakes in Planet Fitness (low-cost high-value fitness centers), Revolve (women’s contemporary fashion e-commerce platform), Backcountry (online retailer of premium outdoor sports gear and apparel) and Radio Systems (supplier of technology-based pet products).

All told, the domestic buyout and turnaround vintage-2012 funds (excluding growth equity and mezzanine) in the Buyouts return database generated a top quartile IRR of 23.4 percent, a median IRR of 12.4 percent and a bottom-quartile IRR of 6.6 percent (for the most part through year-end 2016).

That puts the 2012 vintage comfortably ahead of the median performance of our entire database of 780 such funds, spanning vintages 1969 to 2012. The year’s performance continues the sector’s general upward trend, and 2012’s substantial top-quartile IRR is the highest since its counterpart in 2003, according to Buyouts data.

vintage years

Overall, Buyouts analyzed the performance of more than 2,300 private equity funds and placed them into 18 categories, including domestic and international buyout, turnaround, growth equity and mezzanine funds, as well as funds-of-funds, co-investment funds and secondary funds.

Younger funds of vintage-2013 and later were excluded to avoid the J-curve effect, in which early management fee draws weigh down returns, rendering the performance data less meaningful. (See the accompanying table of top quartile and second quartile domestic buyout, turnaround and growth equity funds for full details on our methodology.)

The majority of our returns database is current as of year-end and comes from 52 public pension funds and related organizations that make their return data public. These include California Public Employees’ Retirement System, New York State Common Retirement Fund, Oregon Public Employees Retirement Fund, Public Employees Retirement Association of Colorado, University of Texas Investment Management Company and Washington State Investment Board.

Of the 13 fund categories analyzed in the accompanying table, domestic growth equity placed first by top quartile IRR (19.3 percent), while secondary funds had the best median (12.5 percent) and bottom quartile (7 percent) IRRs.

fund type

Domestic buyout vehicles, our largest category with more than 600 funds covered, placed second in top and median-quartile IRRs, at 18.7 and 11.4 percent, and had the fourth-highest bottom-quartile IRR, 4.2 percent.

Other strong-performing categories included co-investments and international buyouts, while weaker numbers were posted by international growth equity, domestic mezzanine and funds-of-funds.

Action Item: Download the top and second quartile vintage-2012 funds as a spreadsheet: 2012-vintage quartiles