RCP “Scout Categories” – Background, Key Terms and Methodology

 

The Scout Categories

An essential complement to our database of investment information and our GPScout private fund manager research platform, RCP’s manager analysis has always had a focus on helping professional investors and their advisors make better investment decisions. One of the methods RCP uses to assist its GPScout subscribers is through the RCP Scout Categories.

The assignment of a Scout Category does not express a view on a given manager, fund or a manager’s strategic focus. Rather, the purpose of assigning the Scout Categories is to assist professional investors and their advisors to:
  • Proactively identify, source, and screen managers.
  • Support their fundraising pipeline tracking efforts by increasing market awareness and managing deal flow.
  • Gather insights into managers’ strengths, weaknesses, and historical performance.
  • Identify those managers and their respective funds which RCP believes, based on our proprietary quantitative and qualitative analysis, may (but are not guaranteed) to outperform a relevant benchmark and/or peer group, within the context of the level of risk taken, over the longer term.
  • Compare fund managers (for example, by placing a manager (and its funds) in comparative and historical context in terms of criteria such as industry focus, fund size, geographic scope, fund strategy, manager experience, and track record).
  • Identify and explore managers employing strategies focused on new geographies or segments.
  • Understand the suitability of funds for an intended purpose, providing users with clearer expectations for the likely behavior of funds in different market environments.
  • Maximize travel time by finding / narrowing down the list of suitable fund managers in a given location.
  • Identify hard-to-access-managers, providing users the opportunity to establish relationships with such managers far in advance of their next fundraise.
  • Quickly assess managers that are recently formed and/or are less widely known.

 

There are currently three primary Scout Categories: (i) “Focus List,” (ii) “Emerging Manager,” and (iii) “Access Constrained.”

The three categories should be interpreted as follows:

  • Focus List: These fund managers are generally institutional managers that differentiate themselves – based on a variety of fund manager attributes RCP considers during our own investment selection / due diligence process – and stand out as “best-of-breed” for their particular investment mandate (but are not, for the avoidance of doubt, necessarily managers that RCP has invested with). To be assigned to the Focus List, a manager must distinguish itself across a variety of key attributes that are the basis for our analysis.
  • Emerging Manager: To be categorized as an Emerging Manager, the manager’s most recent fund (closed or currently fundraising) must generally be its first or second institutional fund. RCP’s database includes profiles on more than 400 small and emerging manager funds, enabling users to quickly assess Emerging Managers that are often less broadly known than their more established counterparts. RCP’s database aids in the evaluation of Emerging Manager track records through advanced benchmarking analyses and analytics. These advanced analytics expand RCP’s ability to generate synthetic vintage year and track record benchmarks based off of a team member’s prior deals and/or experience, which can serve as a significant advantage as many institutional investors do not have the ability to create synthetic portfolios through deal level benchmarking.
  • Access Constrained: These managers are generally difficult to access by many institutional investors and, as a result, RCP expects the manager’s current or next fund to be highly oversubscribed. The Access Constrained category is intended to assist users in the identification of hard-to-access-managers, providing users the opportunity to establish relationships with such managers far in advance of their next fundraise.

We believe transparency is extremely important and our investment professionals invest considerable time in writing detailed research reports that are enhanced with our proprietary manager evaluation system and dynamic visualization tools. The designated Scout Categories are justified by the analysis contained in each of the manager research reports, which are modeled after Investment Committee Memos and include an organization and fund history, investment thesis, diligence highlights, and identified strengths and concerns for fund managers, primarily based on information provided directly from GPs themselves. The Scout Categories, in conjunction with the research reports, are intended to afford investors the ability to quickly and easily identify managers that are worthy of further diligence.

*The information, data, analyses and opinions presented herein do not constitute investment advice; are provided solely for informational purposes and therefore are not an offer to buy or sell a security; and are not warranted to be correct, complete or accurate. The opinions expressed are as of the date written and are subject to change without notice. Except as otherwise required by law, RCP Advisors shall not be responsible for any trading decisions, damages or other losses resulting from, or related to, the information, data, analyses or opinions or their use. Past performance is no guarantee of future results. The analysis contained herein is the proprietary property of RCP Advisors and may not be reproduced, in whole or in part, or used in any manner, without the prior written consent of RCP Advisors. Source: RCP Database: Provides private fund and investment-level performance data drawn from fundraising and diligence documents produced by general partners and publicly available information, as well as quarterly unaudited and audited annual financial statements produced by RCP’s underlying fund managers. As of 7/29/2019, RCP’s database contains information on ~1,300 fund managers and more than 3,000 funds. These documents are provided to RCP by the fund managers themselves. These documents are provided to RCP by the fund managers themselves. Information obtained from third parties is believed to be reliable, but no representation, warranty or undertaking, express or implied, is given as to the accuracy or completeness of such information. Performance information provided herein was not prepared, reviewed or approved by the underlying funds or their general partners.

 

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