Track Record Marketing in Private Equity 

Ludovic Phalippou
TBN Private Equity at a Glance

 Strong 

PERFORMANCE 

 Experienced 

ORGANIZATION 

 Expanding Software 

MARKET 

 Differentiated 

STRATEGY 

 Repeatable 

PROCESS 

· Realized Software track record: 3.8x Gross MoM and 49.7% Gross IRR1

· Focused on Software investing for nearly two decades 

· Managing Partners have been together for 1x years 

· Responsible for 2xx Software acquisitions since 200x representing $xx of Enterprise Value 

· About $6.0T Software public market capitalization, +490% increase since 2008

· Most mature Software companies are privately owned

· Market lacks operational discipline, allows for TBN value-add advantage 

• Strategy centered around accelerating growth through operational excellence 

· Consistent execution of the strategy enabled by TBN proprietary processes, business metrics and 

Operating Partners 

TBN is an asset manager with zillions under management and a long history of 

strong performance in a growing Software market 

 Past performance is not an indicator of future results and all data is qualified by the Notes to Presentation. The complete

investment history of TBN is available in materials provided to the staff of ERSRI. 1) Returns are the result of Realized

Investments in Software made by or under the supervision of persons now part of TBN investment staff while at TBN or its

predecessor firm. Since in some cases the investments constituted only a portion of the funds in which they were made, no fund

investor could have made such an investment and no investor received the returns indicated...

• Presentation to Employees' 

Retirement System of Rhode 

Island (ERSRI), June 2020

• Gross return ?!!

• 20 years track record. If 

earned 49.7% p.a. they would 

have multiplied money by 

3,300. Their $7bn would have 

become $24 trillion !! 

Would have noticed, no? 

NB: GDP US is $21T, Japan is $5T

• 3.8x MoM is high -- duration?

• It’s a selected track record !!!?

• There is no lying, but if this is 

allowed you can manufacture 

the most amazing track 

records out of thin air!!!! 
TBN Value Creation Advantage 

As the software market has expanded and new companies are created and scaled, 

the average software company operating profile has not changed 

Public Software Companies - SaaS Public Software Companies Software Portfolio Average 

Margin improvement opportunity can be between ~25 – 40%, a dynamic that persists in 

various market environments 

Source: Software Equity Group LLC – 2020 Annual Report, available at: https://softwareequity.com/seg-2020-annual-software-industry-report/ and SunTrust Software Update – February 2020. The average

public software universe EBITDA margin was calculated using the 2020 estimated EBITDA margin of the companies in SunTrust Robinson Humphrey’s public software company universe with $34M-$2.5B

2020 estimated revenue, a range that would include the current Software portfolio companies of the TBN funds. Please refer to data provided to ERSRI staff for detail regarding 38% EBITDA margin.

Average EBITDA Margins 

38% 

10% 

-3% 
Performance Summary 

EQUITY FUND PERFORMANCE SUMMARY AS OF 3/31/20 

FUND VINTAGE YEAR FUND SIZE 

NET MOM 

(TVPI) 

NET IRR 

TO LPs 

Fund VII 2000 $554M 2.1x 24.8% 

Fund VIII 2005 $765M 2.9x 18.3% 

Fund IX 2008 $823M 3.8x 44.7% 

Fund X 2011 $1,275M 2.8x 38.7% 

Fund XI 2014 $3,662M 2.8x 29.3% 

• Can’t help but see average IRR of 32% over a 20 years period – implies 260x MoM 

• Net MoM of 2.9 is indeed quite high – correctly computed?

• Depends on holding period: 23% p.a. if 5 years

• Thomson Reuters US Software index, past 10 years is:

23.3%!

• Dow Jones US Tech: 19% over past 10 years

• Note a 39% RoR, with 2.8x, means duration of 3 years

• MoM expresses a return in a different language from stock market returns, it helps PE maintain the illusion of doing 

something different. Should mandate MoMs to be compared to Comparable investment, expressed as a MoM.

• Same re vintage year returns (e.g. No vintage lost money in PE)
No dispersion in performance for investors, and not much across 

large firms, it is all the same as public equity

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• The big 4, vintages 2006-2015, gross MoM all between 1.68 and 1.92 (SEC fillings)

• Net of fees, range would be yet smaller!! And if apply a 2-20 to these figures there is 

not much left!

• Similar figures if include all vintages

• None of them show their net MoM!? But they usually show their net IRR!?

• Most PE billionaires are affiliated to these firms

All the data are on my website: www.pelaidbare.com
Quite a contrast:

 Founded in 199x, Big4-A presents itself as follows in its 10K filings: “As of December 31, 2019, we had total 

AUM of zillions, ... We have consistently produced attractive long-term investment returns in our traditional 

private equity funds, generating a 39% gross IRR and a 25% net IRR on a compound annual basis from 

inception through December 31, 2019.”

 Similarly, Big4-B, in its 10K filings prominently states: “From our inception in 197x through December 31, 2019, 

our investment funds with at least 24 months of investment activity generated a cumulative gross IRR of 

25.6%, compared to the 11.8% and 9.1% gross IRR achieved by the S&P 500 Index and MSCI World Index, 

respectively, over the same period, despite the cyclical and sometimes challenging environments in which we 

have operated.”

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Note to oneself: $1bn earning 39% over 30 years would be worth 

$20 trillion. And $20 trillion is the GDP of the United States!

Note to oneself: $1bn earning 26% over 45 years would be worth 

$32 trillion, and that’s 40% of the GDP of planet Earth!
Magic numbers constantly flashed to 

Investors. Should this stay legal?

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Key take away

 If the ‘sophisticated investor’ argument held true, then why are sophisticated investors treated 

like idiots in PPMs and other material? There would be no point! If this is shown it means some 

people believe in this, that they are impressed/influenced by this

 Are these documents kept confidential because they contain the Coca Cola recipe or because 

this content is embarrassing at daylight?

o If PE is very good, why keeping all the information secret, or selectively choosing who to share it with?

o If my numbers are wrong (as often claimed), then why aren’t people showing the correct numbers?

 Why having PE fund managers playing by different rules when presenting their track records?

o Didn’t the SEC banned selective disclosure to equity analysts? And many similar things?

 Most expensive investment vehicles of all times (7% fees average)  sales people can earn 

serious money by promoting PE (consultants, advisors,...). If you can do anything you want as 

long as you do not lie, many will be all too happy to get really creative

 Honest/good people are penalized and have no incentives to scream or to act differently

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