Evaluation of Funds and Fund Managers

In selecting private equity funds for investment, Kensington seeks to identify the top fund managers within the geographic area and segment being targeted, while ensuring that the terms of investment in the fund are fair and reasonable.

The identification, evaluation and ultimate selection of private equity funds encompass a significant number of judgments. Kensington conducts disciplined due diligence and relies on the collective experience of its investment professionals and the skills, experience and contacts of its Investment Committee and Advisory Board members to create an effective process for identifying and selecting private equity funds for investment, in an effort to develop a risk-managed portfolio of top performing funds.

Kensington employs a rigorous screening process to evaluate fund managers, conducting extensive due diligence focussed on a wide range of quantitative and qualitative measures. Some of these include:

reputation and integrity of the individuals;
track record and long-term performance of previous investments made or held by the fund manager;
depth of the management team and their prior experience within the private equity segment being targeted, as well as other relevant experience;
extent and quality of due diligence performed by the fund manager when making investment decisions;
ability of the fund manager to generate deal flow, quality of investment opportunities, and the manager’s strategies for generating investments;
value creation approach employed by the fund manager, including past experience in working directly with portfolio company management;
governance of the fund manager, including decision-making processes, development of staff, teamwork and communication;
deal structuring skills exhibited by the fund manager and its principals;
commitment of the principals and other investment staff to prior funds or other activities;
leadership and management ability of the fund manager’s principals; and
views of other stakeholders of the fund manager, including competitors, advisors, intermediaries, sellers/buyers of portfolio companies to and from the manager and employees of funds and portfolio companies in which the manager has previously invested, in order to assess the fund manager’s actual experience in a transaction and management environment.

Kensington believes that a favourable combination of the above criteria allows a fund manager to achieve top quartile performance. Once a private equity fund has been selected for investment, Kensington monitors its performance on an ongoing basis against these criteria, as part of its active management approach. Kensington will not re-invest with a fund manager who allows its style of investing to drift in an unacceptable manner, or who produces unacceptable returns. Kensington intends to invest only with fund managers who demonstrate an ability to develop and execute a value-creating investment thesis and to generate consistently strong returns. Kensington has developed and maintains an extensive and proprietary database of fund managers and the progress and performance of those managers is monitored on an ongoing basis.

Next: Co-Investing Strategy →

↑ Main: Kensington’s Approach to Investing

Version Française