Operational Value Creation Private Equity

I’m very novice when it comes to Private Equity (PE) world. I am learning as much as possible in a short amount of time; luckily I am currently associated with one of the best PE firms in Asia called Mekong Capital that has started a major shift in its value creation towards Operational Value Creation under an umbrella called Vision Driven Investingframework.

Operational value creation goes far beyond slashing costs or implementing a land-grab for revenue growth. A sustainable operating model should be established to execute on the corporate strategy, but without jeopardizing efficiency or flexibility. Over the last 15 years, the private equity (PE) fund model has become a mainstay in the portfolios of the world’s largest institutional investors. As PE assets under management increased five-fold during that time, the industry has rapidly matured and prospered through a series of business cycles and extreme market dislocations. Although the illiquidity of PE investment often restricts fund allocations to single-digit percentages, repeated findings in academic and for-profit research citing the industry’s outperformance relative to public equity markets underscores its importance in a balanced portfolio. But what has produced this outperformance? And, more broadly, how do successful PE fund managers (general partners, or GPs) consistently and repeatedly generate value for investors (limited partners, or LPs) over time? Skeptics have long pointed to a combination of job cuts and “financial engineering” — i.e. the aggressive use of leverage —…