An analysis of the firm’s track record helps explain why investors were so eager to pour money into the firm’s coffers. From public pension funds that make their data public, Buyouts has collected return data for eight funds sponsored by CVC Capital Partners, including six predecessor funds in the CVC Capital Partners family (including a tandem fund) dating back to the 1996 vintage, $840 million Fund I. Also among the eight are two predecessor funds to the the $3.5 billion CVC Capital Partners Asia Pacific IV LP fund that closed earlier this year.
For the eight funds in the CVC Capital family, the median investment multiple is 1.6x. Bottom quartile is 1.3x and top quartile is a remarkable 2.5x. The median IRR is a healthy 15.5 percent, while the bottom quartile is 10.4 percent and top quartile is 20.9 percent. For comparison, the median investment multiple for the entire collection of international buyout/corporate finance funds in the Buyouts returns database is 1.4x, while the bottom quartile is 1.2x and top quartile is 1.8x; the median IRR for the data set is 8.9 percent, bottom quartile is 4.3 percent, and top quartile is 17.3 percent.
A source close to CVC Capital attributed much of the firm’s success to its having local investment teams based in nearly two dozen offices around the world, including Hong Kong, Madrid, Milan, New York, Paris and Tokyo, and its ability to do large deals in those markets. “You don’t get those deals if you’re (just) sitting in London,” our source said.
The firm’s track record does have a blemish—the 2005, $2.0 billion CVC Capital Partners Asia Pacific II fund, which had lost an estimated third of its value for backer Oregon Public Employees Retirement Fund as of year end. The fund suffered from making an ill-fated investment in Nine Entertainment Co, one of Australia’s largest television networks, as well as from investing much of its capital prior to the financial crisis, a period of rapidly falling valuations. The successor 2008 fund, a $4.1 billion pool, is doing far better. According to backer Pennsylvania Public School Employees’ Retirement System, as of Sept. 30, the fund was generating an investment multiple of 1.4x and an IRR of 14.0 percent. Our source pointed to the fundraising success of the fourth Asia Pacific fund as evidence that the firm has learned from its mistakes, put Fund II behind it and maintains the trust of investors.
Indeed, it is easy to see why since its founding in 1981 as a subsidiary of Citigroup the firm has raised some $71 billion from investors across all its platforms. And the firm is far from alone among mega-firms in generating market-beating returns for investors over a long period of time. Standout performers listed in the chart on p.TK of this issue include The Blackstone Group, The Carlyle Group, First Reserve Corp, Hellman & Friedman and Providence Equity Partners.
Some critics dismiss mega-firms like these as asset gatherers intent on maximizing management fees. But without the strong performance, there would be no assets to gather.