JFL Equity Investors VI, L.P Recommendation Report
GPRS Explanation
The General Partner Rating System ("GPRS") is a proprietary metric developed by Hamilton Lane to assign numerical ratings to a range of quantitative and qualitative measures used in the evaluation
of new fund opportunities. The rating system is comprised of four categories: organization, strategy, track record and risk mitigation. Each category consists of numerous subcategories to which a
GP is assigned a score of 1 to 5, with 5 representing the highest and best possible score. Scores from each subcategory are weighted and totaled to determine category scores and, subsequently,
compute an overall fund score. See below for a more detailed explanation of each GPRS category.
Hamilton Lane leverages information obtained from multiple sources to complete the GPRS, including due diligence questionnaires, introductory and onsite meetings with general partners and
reference calls. Given the differing characteristics across buyout, growth/venture and credit funds, strategy-specific GPRS models are used for the evaluation of individual buyout, growth/venture and
credit opportunities.
Hamilton Lane
The output of the GPRS is used by Hamilton Lane to help inform and direct diligence efforts by highlighting areas of relative strength or weakness for general partners and funds under consideration.
Investment decisions made by Hamilton Lane are not based on GPRS ratings. Similarly, GPRS ratings are not used to compare different general partners or multiple fund offerings.
GPRS Categories
Team
Strategy
ESG
A key component to Hamilton Lane's fund diligence process is the thorough evaluation of a general partner's organization. Analyzing team composition and management, internal
processes, and business practices and procedures are essential to safeguarding client capital. Hamilton Lane seeks to invest in best-in-class managers with leading organizations whose
interests are aligned with those of its Limited Partners.
Sample considerations: team experience and tenure, staffing requirements, compensation, firm ownership, back office practices and IT capabilities
Track Record
.
Gaining an understanding of a general partner's dedicated fund strategy and investment approach is crucial to evaluating the relative strength or weakness of a new fund opportunity.
Hamilton Lane undertakes a comprehensive review of a general partner's investment philosophy and activities, including competitive positioning and value creation capabilities.
Sample considerations: sourcing abilities, market reputation, differentiation, sources of value appreciation
Risk Mitigation
A comprehensive assessment of manager risk mitigation is an important component of Hamilton Lane's diligence process. Risk, encompassing a general partner's investment strategy,
fund and portfolio company profiles, and management practices, is reviewed and evaluated across many measures. It is important to note that the GPRS analysis of risk mitigation is
completed independent of Hamilton Lane's Operational Due Diligence Team and does not rely on any of their findings in its analysis.
Focusing on the quantitative components of assessing investment acumen, Hamilton Lane reviews the general partner's track record utilizing proprietary models to identify drivers of past
success and the potential for replicating successful performance in the future. An assessment of the unrealized portfolio is conducted to ensure the track record is a true representation of
the value of the portfolio. Performance is also evaluated across multiple metrics such as deal size, lead investment professional, industry and geography to identify any trends or anomalies
that may have impacted returns.
Sample considerations: benchmarking, J-curve analysis, cash management, realization activity and hold periods
Sample considerations: portfolio company cash flows and profitability, entry prices and use of leverage, portfolio construction practices, deployment and changes in fund size, personnel
issues, headline and key man risk
Understanding a general partner's approach to managing the environmental, social and governance risks related to its business practices, portfolio management and portfolio company
exposures is an important element of Hamilton Lane's diligence process. By leveraging comprehensive ESG and diversity questionnaires and reviewing ESG and diversity initiatives with
managers during diligence sessions, Hamilton Lane is able to identify industry best practices and evaluate a general partner's ESG capabilities.
Sample considerations: organizational approach, prior investments and expected investments going forward
Executive Summary | General Partner | Investment Strategy | Track Record | ESG | Appendices
February 2023 | Proprietary and Confidential
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