Asset-level Performance Data

In this lesson, we’re going to dive even deeper into benchmarks and explore ‘asset-level’ performance data. When benchmarking, looking at the performance data of a portfolio at the asset-level provides more granularity and insight into a fund manager’s performance and deal valuations. 

Asset-level performance data

If a pattern or trend shows an asset’s performance isn’t tracking as predicted, asset-level data can help a manager identify why the investment may be behind its target. It also works in the reverse scenario; if a portfolio is overperforming, drilling down into the asset-level data can help identify the more successful investments within a portfolio. 

Asset-level benchmarking encompasses core metrics, including deal-level returns, entry and exit valuation multiples, net leverage, fund loss ratios, operating statistics, and more.  

There are typically two ways to measure asset-level performance – by Deal Performance Benchmarks and Valuation Multiples Benchmarks.

What is the difference?

• Deal Performance Benchmarks enable investment professionals to dig deeper into the factors that drive fund performance.

• Valuation Multiples Benchmarks enable investment professionals to identify comparable assets and determine their market value more accurately.

What is a Deal Performance Benchmark?

Deal Performance Benchmarks are crucial for enabling investment professionals to dig deeper into fund performance. They examine the performance of an asset against similar transactions and can give an overview of a manager’s track record for specific industries.

Let’s explore some ways in which Deal Performance Benchmarks can benefit limited partners (LPs), general partners (GPs), and service providers (SPs).

Preqin’s Deal Performance Benchmarks are calculated using cashflow data from fund managers’ quarterly reporting of private capital fund deals to their investors. Deal-level transaction data attributes TVPI, RVPI, DPI, and IRRs to each deal. Those values are then aggregated into anonymized benchmarks, based on the possible filtering combinations in the benchmarking tool. The data is anonymized due to the sensitive nature of fund managers’ quarterly reports.  

You can find out more about how Preqin calculates its Deal Performance Benchmarks here.

What is a Valuation Multiples Benchmark?

To better determine asset market value, a Valuation Multiple Benchmark can be used. Private market professionals can identify comparable assets and determine their market value more accurately with this type of benchmark. They can also evaluate trends in asset pricing by sector, region, enterprise value (range), and deal years, which provides insight into asset valuations based on true market conditions and a high level of compliance with market standards. In recent years, we’ve seen regulators establish more guidelines around asset valuations, so the demand for reliable benchmarks to support their investment decisions is more important than ever.  

Preqin’s Valuation Multiples Benchmarks are calculated using the fund portfolio company’s operating metrics, which are reported by GPs to LPs. Subscribers to Preqin’s Transaction Intelligence can view anonymized benchmarks that provide both entry and exit multiples, such as EV/EBITDA, EV/revenue, and net debt/EBITDA, broken down by asset class, strategy, deal year, geography, industry classification, and EV range.  

You can find out more about how Preqin calculates its Valuation Multiples Benchmarks here.