Abell: Evaluating PE managers requires measuring journey risk, not just end returns
Alex Abell · Alex Abell - Lower Middle Market Buyout Investing at RCP (EP.383) · May 2, 2024 · at 49:09
Alex Abell of RCP Advisors explains why evaluating buyout fund managers by exit multiples alone fails to capture severe binary risks experienced during holding periods.
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“If we have a way of measuring that kind of risk systematically through their portfolios, then the end number itself is not the only thing we need to look at. We need to look at the journey. Because there's going to be lots of examples of that where they aren't able to save it, and just because they were able to save that company does not mean that if they're buying companies that inherently have certain types of binary risk, and we've just been lucky that they haven't come to play in a negative way yet, well, that could lead us to bad decisions.”
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