US VC firms dominate the list of top global firms; only two European firms rank in the top 10

The U.S is home to the some of the world’s leading private equity firms. So no doubt the U.S-based firms have come to dominate the industry. In a recent report, eight of the 10 best performing PE firms were found in the US. The report was compiled by Oliver Gottschalg, a faculty at HEC Business School, Paris. The Column Group, healthcare-based investments firm, was ranked the top –performing venture capital firm for the second time in a row since the annual study published in 2010.

The united states is the birth place of private equity. The country boasts of some of the world’s best private equity firms across the country that have done consistently well except a few times. The Europe, where private equity industry is robust, the firms didn’t fare well. Only two European firms made the top 10: Scottish Equity Partners, Glasgow and North Zone,London, which ranked sixth and eighth on the list.

Scottish Equity Partners and North Zone appeared on the last year’s top 10 list. The firms have raised 260m pounds and 500m dollars,respectively. Scottish Equity Partners raised its last round in 2016 and North Zone raised its last round in November last year.

The reason behind a large number of US top private equity firms are in the list is explained by the size of the market. The US deal activity is 3 times greater than in Europe. European venture capital funds invested 18.5 bneuros in nearly 2,494 companies across Europe. US funds, on the other hand,pumped in $69.1 bn into 5,058 companies and start-ups according to data available from Pitch book. 

The latest rank of the firms is based on data from Preqin. Gottschalg, who made the report, kept performance of funds as criteria for ranking the firms and choose the firms that raised at least $350m over two or more funds between 2006 and 2015. 

Overall the research covers 83 venture capital firms that raised a total of$85 billion between 2006 and 2015, which accounts for roughly 20 percent of total comparable venture capital fundraising, according to Preqin.

Technology and life sciences companies are major companies for investments among the top 10 funds. Third Rock Ventures which ranks number two on the list invests majorly in bio-technology start-ups. 

Spark Capital and Arch Ventures, at rank three and four,respectively, raised $1.35 bn and $1.46 bn to finance developments in biotechnology this year.

Amid the raging pandemic, venture capital remained robust through the first half of this year. With 6,379 deals in the first six months of the year,private companies raised $112 bn. The total was down by 2% from the first half of the last year, according to the Wall Street Journal.

Ranking methodology

The ranking of PE firms by HEC is based on the aggregate performance of the funds. The rankings exclude small funds within consistent performance and includes firms that have raised at least two funds worth $350m between 2006 and 2015. Additionally, firms that provided complete information related to fund performance were included for rankings.

HEC didn’t consider the funds raised after 2015 as their performance is still too unreliable to be judged at this point. Internal rates of return, cash-only return multiples and TVPI were collected and weighted against the age of funds,as data from older funds is typically more reliable.

If a firm scores one, it means the firm has an aggregate performance one standard deviation above the average, or better than 85% of all firms. A score of two means performance of the firm is double of the firm that scores one. A VC firm with average performance has zero score.


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