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In the right place at the right time

How to arrive at a list of the 20 best-positioned firms in global private equity? Below, you will find some of the reasoning that informed our decisions. You will see that we also consider potential weaknesses – making the point that even the Power Managers cannot afford to rest on their laurels

Abraaj Capital Connected In Menasa
Reports in May that Abraaj Capital may be close to taking a stake in Dubai Ports was a reminder that this house really knows everyone who is anyone in its target region. Dubai Ports is an asset ultimately owned by Dubai's ruler Sheikh Mohammed bin Rashid Al Maktoum, and you don't get to sit at his table without impeccable credentials. The firm has worked hard to achieve this level of connectivity. Its networking is relentless and proficient, as evidenced not least by its recently bestowed status as an official partner of the World Economic Forum. With great access to the people who control MENASA deal flow, and billions of fresh capital to deploy, Abraaj is sitting in an enviable spot.

Whether its star would shine quite so brightly without charismatic founder Arif Naqvi at the helm is debatable. The strength of any network derives from its members, and Naqvi remains a crucial source of strength for this one.

Actis Emerging brand
Having raised $4.8 billion for investment in emerging markets since its spinout from the UK government in 2004, Actis has demonstrated impressive pulling power with investors. This was underlined towards the end of last year when the firm raked in $2.9 billion in fresh firepower for its 100 investment professionals to deploy in 12 developing countries. The firm has honed a reputation for spotting the best growth prospects in complex markets – its African franchise in particular has been on the receiving end of much acclaim.

Recent UK press coverage focusing on lucrative bonuses paid to members of the Actis team (controversial given the firm's mandate to assist impoverished communities) has served as a reminder that even the best brands can come under threat in unexpected ways – and also underlines the sensitivities surrounding compensation in today's lean times.

Advent International Sharing the glory
Chat with senior managing partners at Advent about the firm's culture, and the mantra “there are no heroes” is likely to surface: they pride themselves on being part of a flat, non-hierarchical firm that encourages everyone to be an active participant in its business decisions – even the youngest associates. Unlike some firms driven by a few big personalities at the top, Advent is run by a dozen senior managing partners, who every two months gather in different locations across the globe for a face-to-face powwow, and have, on average, been working together for roughly two decades.

Their active apprenticeship approach with younger partners cements the continuance of cohesive leadership beyond the tenure of current managing GPs, but nevertheless poses a threat that Advent might be nurturing the next great spinout.

Affinity Equity Partners Patience and discipline
Since closing its current $2.8 billion buyout fund in 2007, Affinity has done precious little. On purpose, that is. The firm hasn't made an investment since January 2008, and according to commander-in-chief KY Tang, that's because the market has been full of froth. As a result, more than three-quarters of the fund's capital remains to be drawn, and Tang says his investors love the discipline.

To be sure: at some point Affinity will have to switch back into capital deployment mode. Recent efforts to buy a Korean brewery saw the firm outbid by KKR. Could too much dry powder ever become a problem? Tang & Co will say they are far away from any pressure to invest – and start buying things when they think the time is right.

Canada Pension Plan Investment Board Pension Investor of the future
Amid the dismal US pay-to-play accusation in the US, few have thought to look to Canada for a better way. The Canada Pension Plan Investment Board (CPP IB), with a private investments team led by Mark Wiseman, has the staff and resources to not only vet fund commitments in house, but to do its own direct investing. Its programme is overseen not by politicians but by an independent, financially savvy board. Over the past five years, CPP IB has quietly invested some $3.5 billion in direct equity. Expect more of this as Wiseman and team take market share from traditional GPs. And, as it does so, expect enhancement to this relatively low-profile investor's brand.

CVC Capital Partners Large but flexible
Possessing a freshly raised €11 billion fund can arguably be construed as both a blessing and a curse. A blessing because CVC can put its capital to work as valuations of target companies tumble – a curse because the debt drought raises question marks about the ability of any fund operating at the larger end of the market to deploy its capital effectively – at least for the time being.

Our bet is that CVC proves adept at deploying the capital better than most, and it's the firm's innovation that gives us confidence: whether making political friends in Germany (as in the case of Evonik Industries) or agreeing a deal with Barclays [still subject to completion] that assists the bank's strategic priorities. It has also traditionally executed a lot of deals in the mid-market, meaning that this is one firm that will not be risking accusations of style drift as it fishes in a smaller pond.

Coller Capital Quality seconds
The dynamics in today's secondaries market are complex to say the least. For various reasons, fund interests have been flooding the market – and yet predictions that 2009 would be a record year for secondaries activity appear likely to be wide of the mark. Of course, there's a difference between supply and quality supply (at the right price).

Arguably no firm knows when to make the right moves better than Coller Capital, the innovative secondaries powerhouse headed by charismatic founder Jeremy Coller. Time and again, the firm has struck deals others were unable to do or simply didn't see coming – helping to explain why it has become the most powerful magnet for LP capital in the secondaries space. With such bold investing comes the danger of a misstep, but there are few signs yet of Coller making a false move.

First Reserve The power house
Having raised $20 billion for energy-focused private equity funds over the past five years, First Reserve is the largest “niche” player in the world, ranking 11th within the PEI 300 list of all private equity firms by size. The firm's compelling strategy of building diverse assets within the enormous energy space checks many boxes for limited partners, although these troubled times allowed First Reserve, led by William Macaulay, to “only” raise $9 billion for its most recent Fund XII. The firm's establishment of a separate infrastructure platform means ever more diverse bets placed on the future of energy within the main fund.

General Atlantic Focused on growth
With credit markets still largely closed for business, any form of private equity investing that doesn't rely on turbo-charging businesses with debt has got to be on investors' radar. Growth capital is such a strategy, and General Atlantic has been honing its skills in this area for 29 years. During this period, the firm has pursued the strategy with pure single-mindedness, and there aren't many players in private equity that practise growth capital investment on such a large scale: $13 billion under management, and 70 professionals in offices around the world.

The obvious catch is that in shrinking economies growth companies are hard to find – and the deeper the downturn, the bigger the challenge. However, with its vast resources, long-standing experience and philosophical rigour, General Atlantic should be expected to pass this test with flying colours.

Hony Capital China Insider
“Close to the government and the progressive forces inside the Department of Finance who are trying to develop China's private equity culture” – this is how one well-informed observer describes Beijing-based buyout specialist Hony Capital. John Zhao moves in all the right circles and sits on the board of influential Legend Holdings, Hony's first backer and also the controlling shareholder of computer manufacturer Lenovo. Talk about Guanxi.

Of course, were you to subtract the awesome web of relationships from Hony's armoury, its ability to continue to execute its investment model would be called into question. There again: given the firm's elevated standing in the market today, it would take a rather spectacular fall from grace for that to happen.

Index Ventures Winning formula
Under the guidance of the Rimer brothers, Geneva-based Index Ventures may initially have provoked scepticism as it went about attempting to demonstrate that a Silicon Valleystyle approach to venture investing could be successfully transplanted to Europe. Having gone on to back some of the region's biggest entrepreneurial success stories – notably, internet telephone firm Skype – few now doubt the efficacy of the Index formula.

In the period ahead, there's little reason to doubt Index's ability to remain at the head of an emerging European venture elite that also includes, for example, Paris-based Sofinnova Partners. Some of its peers are perhaps doing more adventurous things by way of aggressive overseas expansion and/or honing new strategies. Index must hope it will not suffer from finding itself wrong-footed – at this point, there's no such evidence.

Kleiner Perkins Caufield & Byers Aggressive moves
Kleiner Perkins has near-monopolistic access to the elite of Silicon Valley, and has for years. This means not only access to top Silicon Valley ideas, but the ability to pair geniuses from the Boondocks with nauseatingly successful tech executives. In order to be relevant over the next economic cycle, Kleiner Perkins will need to stay well ahead of market disturbances. The firm has placed big bets on China, having launched an office there in 2007, and on green tech – hence Al Gore as partner. The China launch has been rough – the firm lost a senior partner there to Matrix. And it's too soon to measure the green tech success. But don't bet against John Doerr and team.

Kohlberg Kravis Roberts Adaptable giants
Kohlberg Kravis Roberts (KKR), not known for an ambition to do small things, is currently betting the farm on a startling expansion of its franchise just as the private equity mega-fund looks set to shrink. All the more reason, then, for KKR to launch capital markets services, infrastructure, real estate and debt funds, and sundry other services. The old model of Wall Street powerhouse, a la Goldman, was advisory with a side of principal. KKR's principal-with-a-side-of-advisory may well become the powerhouse model of the new Wall Street. But can KKR rely on the continuing flow of capital to support its planned global dominance?

LBO France Mid-market with a difference
At a time when we're repeatedly being told that the market has gone quiet, French mid-market specialist LBO France has been making a lot of noise. With nearly €1 billion raised for a new mid-cap fund towards the end of last year, the firm is now focused on raising a new small-cap fund and a credit-focused fund. Also boasting a real estate strategy, LBO France is no run-of-the-mill mid-market private equity house. Crucially, it has been able to develop a credible multi-strategy approach thanks to its longevity and intimate relationships in the French business world.

Some impressive recent returns, such a lucrative exit from technology systems firm Cegelec, suggest LBO France is riding the economic storm well – but the firm's large portfolio will surely have its pressure points.

Lone Star Funds The stars align
It is hard to fit Lone Star into a neat alternative asset category, which positions the firm well in these chaotic times. It acquires either distressed assets, or good assets from distressed sellers. These assets can include bundles of mortgages, real estate, or whole banks. A secret weapon of the firm is Hudson Advisors, the site of thousands of employees who sift through loan documents in search of work-out opportunities. Dallas-based Lone Star is led by the secretive John Grayken, who inspires confidence and ambition in his colleagues and investors, and fear in those who bid against him. Strong as it may be, however, it's still at the whim of the fundraising market's vicissitudes – and the coffers could do with a boost.

Oaktree Capital Loan to own legends
Oaktree Capital Management's toolbox is filled with enough instruments to tackle whatever investment opportunity comes its way, but the strategy for which it is known best – debt-for-control – is paying off in spades these days. Gaining control of a troubled company by acquiring its debt at a steep discount and then taking control in a subsequent bankruptcy process is arguably one of the most lucrative investment theses in today's volatile economic conditions.

It is perhaps not surprising then that onlookers think the firm won't have to go beyond existing LPs to rapidly raise $5 billion for its fifth “principal opportunities” fund. As with all distressed investment specialists, however, should the firm make the wrong bets on struggling companies, it would swiftly find admiration less forthcoming.

Riverside Company Small is beautiful
Riverside Company's investment philosophy has guided it through some hard times and helped it build a track record that limited partners know and trust. Simply, the firm invests in small- and mid-sized companies using moderate amounts of leverage. Riverside relies on its investment experience to find quality companies and its operating experience to deliver these companies a power boost.

Its “steady as you go” approach has helped Riverside avoid some of the excess of the heady years of the buyout boom and remain relatively unscathed in the downturn. But with a sprawling global portfolio, Riverside may be exposed – and also to investors struggling to fund its ambitions amid leaner times for all.

Terra Firma Drive and creativity
Terra Firma makes the cut on account of its people. Founder-owner Guy Hands has drive, conviction and creativity in spades and takes some beating as a dealmaker. The firm also fields a formidable roster of senior professionals bringing deep expertise in financial structuring, operations and portfolio management. Its Herculean, very public efforts to turn around troubled music company EMI was testament to what this line-up is capable of. Earlier this year, EMI unexpectedly returned to profitability.

Whether this reversal of fortune is enough to recover a sufficiently large portion of Terra Firma's €2.6 billion equity outlay for EMI, following a 50 percent impairment charge in March, is a moot point. Critics say Hands effectively bet the farm and lost. But the firm's people, including their leader, appear to have lost none of their hunger for deals. They're down on their biggest investment, but we wouldn't count them out. Even on EMI the fat lady has not sung.

Vision Capital Niche player
buyer of portfolios of mature European mid-market companies, Vision Capital operates in a niche. Furthermore, it's one the firm appears to be exploiting rather well if the recent close of a new €680 million fund is any guide. Under the charismatic leadership of founder Julian Mash, the firm has now raised a total of seven funds for its distinctive strategy since formation in 1997 and invested in seven portfolios with an underlying enterprise value of more than €2 billion. One question that may give pause for thought as the firm grows its resource to meet the demands of a large fund: will Vision Capital ultimately become a genuine market-leading franchise, rather than simply a vehicle for the mercurial talents of its founder?

Warburg Pincus Experience is everything
Warburg Pincus has been in the industry since 1971 and raised countless funds. The firm has invested more than $29 billion in more than 600 companies in 30 countries since then. It also has a large and thriving network of investors and companies built over its long tenure. Some of the firm's bigger investments include Aramark, Bausch & Lomb and Jarden.

But Warburg could yet see struggles ahead. The value of investments made at the height of the buyout boom have tumbled in the financial meltdown – and questions marks still hang over its investment in bond insurer MBIA, for example. Versatility is not necessarily a guarantee of success.