20%
Risk-adjusted return uplift.
Empirical research shows that diversification can significantly enhance risk-adjusted returns, with well-constructed portfolios often achieving a 20% improvement.
The Approach · 02 / 03
Our two pillars
of success.
Our strategic foundation rests on two essential pillars: selecting the best and most consistent managers, and constructing a meticulously diversified portfolio. By moving downmarket to acquire less sophisticated companies, we embrace higher risk that is rewarded with higher returns.
Pillar 01
Selecting the best managers — through
data and expertise.
Manager selection is critical in achieving performance in private equity. The gap between top- and bottom-quartile managers can result in up to 16.9% variation in annualized returns, underscoring the importance of skill in manager selection.
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Quantitative screening.
Proprietary data-driven scoring model evaluates funds across performance and operational criteria to filter out underperformers.
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Investment thesis & team assessment.
Beyond surface-level metrics, we assess each manager’s investment thesis, team, value-creation playbooks, and competitive edge.
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LMM adherence.
Strict adherence to Lower Mid-Market focus — we filter for managers staying disciplined within their sweet spot.
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Combined quant & qual.
The combination of quantitative rigor and qualitative insights identifies managers positioned to sustain high performance through cycles.
Pillar 02
Portfolio construction — reducing risk while capturing upside.
The LMM presents a unique opportunity with its higher returns and growth potential. Smaller companies often carry increased idiosyncratic risks due to their scale. By employing Modern Portfolio Theory, we mitigate these risks — creating a balanced portfolio that optimizes risk and return while positioning us for asymmetric upside potential.
∞
Asymmetric upside, limited downside.
By combining robust manager selection with disciplined diversification across sectors and geographies, we maintain the market's upside while limiting downside exposure.
Active risk management
Continuous monitoring.
Our approach doesn’t end with portfolio construction. Continuous monitoring of portfolio companies, regular performance assessments, and close engagement with our selected managers are integral to our process.
Strategy alignment
Promptly addressed risk.
This proactive approach ensures our investments remain aligned with strategy and that any risks are promptly addressed. Penguin Capital delivers an investment experience that maximizes return potential while maintaining a strong emphasis on risk management.