Private equity failing to dazzle sceptical firms

Michael Bow
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THE PRIVATE equity industry is falling behind the legal sector and commercial insurers on reputational issues, with the popularity of private equity partners falling since 2010, according to a major new study.

Despite backing private equity as a key driver of economic growth, the opinion that institutional investors held of private equity partners and portfolio managers was broadly negative, the survey found.

Lawyers and commercial insurers were considered to have a better reputations, with both viewed in a positive light by financiers.

The study, by Gracechurch Consulting, polled 300 global investors, each responsible for ploughing billions into private equity funds.

“The key issues driving this negativity centre on the perceived lack of integrity around the deal process and a lack of alignment around the objectives of the deal,” Ben Bolton, chief executive of Gracechurch, said.

Gracechurch consulting private equity and reputation survey 2013

The survey is based on a so-called Net Promoter Score (NPS), a metric that the company uses to measure opinion on private equity firms.

The score is calculated by collecting 2,000 responses on a host of metrics to arrive at a figure between minus 100 and plus 100. Any NPS that is positive is considered good and any score that is negative is considered bad. An NPS of plus 50, for example, is considered excellent.

Out of the individual firms, Hellman & Friedman recorded the highest opinion of investors, with a score of plus 23.

The UK’s oldest private equity firm, 3i, came last in the poll, with a score of minus 45. The listed company, which has been moving away from private equity into debt management since last year, declined to comment.

Overall private equity firms recorded a score of minus three overall, versus plus 12 for legal advisers and plus eight for commercial insurers.

The score for the calibre of partners and portfolio managers fell from plus 7.2 down to just over 7.0, the only metric to fall since the last poll in 2010.