2013
Annual
Report
In 2013 alone, private equity invested

more than $400 billion 2013

IN ROUGHLY 2,000 U.S. COMPANIES.

PRIVATE EQUITY FIRM...
Who We Are

Our Mission

Established in 2007 and based in Washington, D.C., the
Private Equity Growth Capital Council is a...
From the
President
Welcome to the Private Equity
Growth Capital Council’s 2013
Annual Report.
The focus on the private equ...
promoting unique research and analysis. Most notably,
we released our annual comprehensive breakdown of
private equity inv...
Section 1

Public Affairs
The PEGCC entered 2013 with a continued focus on telling the broader
private equity story in an ...
New Educational Videos
Video case studies remained a core component of the
Private Equity at Work campaign, highlighting c...
In recognition of its Private
Equity at Work campaign,
the PEGCC won a PRSA Silver
Anvil Award of Excellence.

Media Outre...
■■

■■

Published in The New York Times DealBook blog,
PEGCC President and CEO Steve Judge wrote
a guest column on the imp...
Section 2

Government Affairs
Early in 2013, the PEGCC recognized that it needed to dedicate substantial
time and effort t...
and worked with many allies on the Hill and in the
larger business community by becoming a founding
member of the BUILD Co...
Sen. Michael Bennet (D-CO) (left) and former Sen. Evan Bayh (D-IN), senior advisor at Apollo Global Management,
speak at t...
not subject to the restrictions on investing in private
funds where it is acting in a fiduciary or similar
capacity on beh...
Section 3

Research
Research plays a critical role in illustrating how private equity and growth
capital benefit the Ameri...
economy and illuminating the diverse industries and
regions that receive investment from the industry.

Private Equity at ...
Private Equity Trends & Performance
To provide a snapshot of the private equity market, the
PEGCC Research team tracks fun...
Section 4

Membership
Services
Increased engagement from PEGCC members directly improves the
Council’s ability to be at th...
Annual Meeting and Member Dinner: Held annually
in Washington, D.C., this year’s event kicked off with our
Member Dinner f...
Current Membership
Our Members
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PRIVATE EQUITY GROWTH CAPITAL COUNCIL
950 F Street, NW Suite 550 | Washington, DC 20004

Phone: (202) 465-7700 | Email: in...
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2013 PEGCC Annual Report

  1. 1. 2013 Annual Report
  2. 2. In 2013 alone, private equity invested more than $400 billion 2013 IN ROUGHLY 2,000 U.S. COMPANIES. PRIVATE EQUITY FIRMS DELIVERED more than $120 billion to investors in 2013. Roughly 2,800 PRIVATE EQUITY FIRMS and more than 17,700 PRIVATE EQUITY-BACKED COMPANIES are headquartered in the U.S. MORE THAN 7.5 MILLION PEOPLE WORLDWIDE ARE EMPLOYED by U.S.-based private equity businesses. Private equity firms invest in a WIDE VARIETY OF INDUSTRIES: Consumer Financial Services Information Technology Energy Business Services Healthcare Materials & Resources
  3. 3. Who We Are Our Mission Established in 2007 and based in Washington, D.C., the Private Equity Growth Capital Council is an advocacy, communications, and research organization representing leading private equity and growth capital firms united by their commitment to growing and strengthening the businesses in which they invest. The Private Equity Growth Capital Council is an association of firms committed to developing long-term value by investing in and building enduring companies through the alignment of interests between investors and management and providing financial, operational and strategic resources and direction. Through this approach, our member firms provide superior investment returns to pension plans, university endowments, charitable foundations and other investors. In addition to delivering superior investment returns, our member firms are committed to upholding the highest standards of integrity and acting in a way that enhances the reputation of our industry. What We Do The PEGCC advocates on behalf of the private equity and growth capital industry on Capitol Hill and before regulatory agencies, educates the public about the value of private equity, develops new research highlighting the critical role private equity and growth capital plays in the U.S. and global economies, and provides a vital forum for our members to discuss industry trends and challenges. About Private Equity Private equity is a critical source of capital investment in the U.S. Our investment model is simple: we seek out companies that have significant potential for growth and invest capital, time and effort to improve their performance and increase their value. Private equity investment creates stronger, more valuable American businesses, and provides public and private pension funds, university endowments and charitable foundations with superior returns. The Private Equity Growth Capital Council represents the shared interests of our member firms. We seek to engage the public, policy makers, the media, and other stakeholders in our industry by developing information about the contribution of private equity and growth capital in the economy and by advocating policies that encourage responsible investment, access to capital, economic growth and job creation. Table of Contents From the President.........................................................4 Public Affairs..................................................................6 Government Affairs .....................................................10 Research.......................................................................14 Membership Services...................................................17 Private Equity Growth Capital Council | 2013 Annual Report 3
  4. 4. From the President Welcome to the Private Equity Growth Capital Council’s 2013 Annual Report. The focus on the private equity industry in 2013 began where the presidential election left off. Our year started with President Obama singling out the tax treatment of carried interest during a nationally televised interview before the Super Bowl. In addition to carried interest, the implementation of Dodd-Frank and the possibility of tax reform remained front and center throughout the year. In response to these challenges, the PEGCC spent much of 2013 working to shape the debate around these issues, and obtaining results that benefit our membership. In 2013, we concentrated our work in several areas, including continuing our award winning Private Equity at Work public education campaign. We redoubled our efforts to educate the policy community about the value of private equity and growth capital. This included allocating considerable resources to connect policymakers with portfolio companies operating in their states and districts so that they could get a first-hand look at the benefits these companies bring to the community and the local economy. We continued to make a valuable contribution to the public debate about our industry by producing and
  5. 5. promoting unique research and analysis. Most notably, we released our annual comprehensive breakdown of private equity investment by state and Congressional district, and our second annual analysis and ranking of large public pension fund allocations and returns from private equity investments. The Council successfully defended renewed attacks on the tax treatment of carried interest. We also continued to make progress with the House passage of H.R. 1105, a bill exempting advisers to private equity funds from SEC registration requirements, and helped organize a coalition of industries and businesses to push for retaining the full deductibility of interest expenses in tax reform proposals. The PEGCC also welcomed a new class of members this year. Our Associate Members are comprised of leading law and accounting firms. They bring a unique perspective about the industry and diverse skillsets into the association that will strengthen our ability to advocate for private equity and growth capital. Their expertise and participation has already been felt throughout the Council, including our submission of two amicus briefs, numerous regulatory comment letters, and their participation in our General Counsels’ Day and Chief Compliance Officers’ Working Group. Lastly, the end of 2013 marked a transition in the Council’s leadership on the Board of Directors. Our Chairman of the Board, Mark Tresnowski of Madison Dearborn Partners, stepped aside after four years of exceptional leadership. From our many legislative battles over carried interest and the Dodd-Frank Act, to the 2012 presidential election that brought our industry into the national spotlight, Mark guided the Council with equanimity and the friendly demeanor that became his trademark. There is no doubt that we are a more robust and effective advocacy organization as a result of his hard work and dedication to the PEGCC and the entire private equity and growth capital industry. In 2014, we welcome Ken Mehlman of KKR who succeeds Mark as our new Chairman. Ken brings an unrivaled blend of public policy and private equity experience to the position. As a member of the PEGCC’s Board of Directors, Ken has long been a driving force behind our major initiatives, and we are very fortunate to have him as our new Chairman. In sum, private equity and growth capital have a compelling story to tell, and the Council will continue to push hard to educate policymakers and the public about the industry. By strengthening companies and delivering superior investment returns to public pension funds, university endowments and charitable foundations, our industry makes a positive difference in people’s lives every day. As we reflect on the year just passed and look to 2014, we thank you for supporting our efforts. Please enjoy our 2013 Annual Report. Sincerely, Steve Judge, President & CEO Private Equity Growth Capital Council | 2013 Annual Report 5
  6. 6. Section 1 Public Affairs The PEGCC entered 2013 with a continued focus on telling the broader private equity story in an effort to build on the reputational gains made during the election year. The year started just where 2012 left off, with a flurry of press coverage surrounding President Obama’s calls to change the tax treatment of carried interest in a pre-Super Bowl interview. Private equity faced a new set of challenges in 2013. The debate around tax reform began in earnest, and longstanding policies important to the private equity business model stood at risk. Keeping pace with its 2012 efforts, the PEGCC Public Affairs department kicked off 2013 with a focus on communicating and demonstrating the industry’s value proposition for the U.S. economy, while ramping up aggressive issue advocacy for legislative and regulatory priorities. The PEGCC worked with the BUILD (Businesses United for Interest and Loan Deductibility) Coalition to shape public discussion about the issue of interest deductibility in tax reform. Unlike other tax reform groups, the Coalition’s strategy was to engage early and educate Members of Congress during their decision-making process. The Coalition, which launched on May 22, has continued to produce and distribute reliable research and policy arguments for maintaining full interest deductibility. The PEGCC will continue to work with the BUILD Coalition to emphasize the importance of interest deductibility for 6 Private Equity Growth Capital Council | 2013 Annual Report businesses of all sizes and how detrimental it would be to the economy if it were limited in any manner. Private Equity at Work The PEGCC’s Private Equity at Work campaign was active throughout the 2012 election to balance the flow of information about the private equity industry to the general public, the press, and policymakers. In recognition of this work, the PEGCC and its agency of record, The Glover Park Group, won a PRSA Silver Anvil Award of Excellence, received an Honorable Mention from the Bulldog Media Relations Awards, and were finalists for a SABRE Award. Though the 2012 election has come to a close, the Private Equity at Work campaign remained in full force throughout 2013. The campaign’s website (www. PrivateEquityAtWork.com) continues to serve as a hub of educational information, regularly updated with illustrative videos, compelling infographics and featured news content demonstrating the critical role that private equity plays in the U.S. economy.
  7. 7. New Educational Videos Video case studies remained a core component of the Private Equity at Work campaign, highlighting companies engaged in successful private equity partnerships. During 2013, the PEGCC produced video case studies showcasing Berry Plastics, Entrust, and a carried interest whiteboard video. ■■ ■■ ■■ Based in Evansville, Indiana, Berry Plastics is a leading provider of value-added plastic consumer packaging and engineered materials. Berry Plastics benefitted from operational expertise and guidance from Apollo Global Management, increasing net sales and more than doubling employee headcount between 2005 and 2012. Entrust is a trusted provider of identity-based security solutions based in Dallas, Texas. With help from private equity firm Thoma Bravo, Entrust innovated their product line to better protect their customer base, which includes banking institutions and U.S. government agencies. Since 2009, Entrust has increased revenues dramatically. Increasing its focus on tax reform during 2013, the Council continued to use educational whiteboard videos to explain issues that are often misunderstood or mischaracterized. The Council’s latest “What is Carried Interest?” video concisely explains what carried interest is and why it’s appropriately taxed as a capital gain. The video was viewed nearly 7,000 times during 2013. Berry Plastics video case study Entrust video case study ’What is Carried Interest?’ whiteboard video Private Equity Growth Capital Council | 2013 Annual Report 7
  8. 8. In recognition of its Private Equity at Work campaign, the PEGCC won a PRSA Silver Anvil Award of Excellence. Media Outreach While the PEGCC has increased its use of new and interactive communications tactics, traditional media remains the core of its efforts. The compelling data produced by the PEGCC Research team earned significant coverage during 2013. The Council’s investment report, “Private Equity: Top States and Districts,” quantified private equity investment in the U.S., ranking top states and Congressional districts that received private equity investment. With proactive press outreach and an illustrative infographic, the “Top States and Districts” report was covered by 40 regional and national news outlets, including The Wall Street Journal, The Denver Post, the Miami Herald and Bloomberg TV. The PEGCC’s second annual Public Pension Fund study was equally successful, proving that private equity outperforms all other asset classes by ranking the top 10 pension funds by private equity performance and private equity allocation. The PEGCC’s pension report, accompanied by an infographic illustrating the data, was covered by 33 outlets, including Bloomberg, Pensions & Investments, the San Francisco Chronicle, The Boston Globe and Politico. Private Equity at Work Private equity invests in a wide variety of industries. 2,800 3% Includes approximately U.S. based private equity firms, 18% $3.6T ten years. Materials & Resources Business Services Information Technology 16% Invests approximately over the last Healthcare 17,700 Sponsors more than U.S. based companies that employ 1 2 3 4 5 6 7 7.5M 9% Financial Services PEOPLE WORLDWIDE 19% 18 Consumer % 17% Energy (2012 Investments) Top 20 Private Equity Investment by State (2012 Investments) 2012 U.S. Total: $347B in 2,083 portfolio companies BY STATE NUMBER OF INVESTMENTS TEXAS 222 $46.6 NORTH CAROLINA 64 CALIFORNIA 255 $35.0 MICHIGAN 50 $9.6 COLORADO 67 $26.8 MASSACHUSETTS 71 $9.6 ILLINOIS $10.1 119 $19.1 WISCONSIN 47 $9.1 FLORIDA 115 $17.3 INDIANA 35 $8.5 NEW YORK 96 $15.6 WASHINGTON 39 88 $15.0 MISSOURI 30 $7.6 NEW JERSEY 67 $14.8 UTAH 26 $6.8 GEORGIA 77 $11.9 ARIZONA 37 $6.7 OHIO 66 $10.4 OKLAHOMA 29 $6.0 In addition to coverage earned by PEGCC research, the Council helped to place three opinion pieces during 2013. $8.2 PENNSYLVANIA ’Private Equity: Top States and Districts’ infographic 8 Steve Judge appearing on Bloomberg’s ‘Money Moves’ INVESTMENT VALUE (BIL) Private Equity Growth Capital Council | 2013 Annual Report ■■ Pam Hendrickson, Chief Operating Officer at The Riverside Company, authored an op-ed published in The Wall Street Journal titled, “Think Twice Before Raiding Carried Interest.”
  9. 9. ■■ ■■ Published in The New York Times DealBook blog, PEGCC President and CEO Steve Judge wrote a guest column on the implications of the Sun Capital case entitled, “Why a Pension Case will not Change Private Equity Tax Law.” Again, in an opinion piece that ran both as a print letter in The New York Times, as well as in a longer form on the paper’s DealBook blog, Judge explained “Why Carried Interest is a Capital Gain.” The Numbers The Council’s efforts showed impressive results throughout 2013. 230 80 The PEGCC executed a record 80 meetings between Members of Congress and portfolio company CEOs. 1,750 As of the end of 2013, the Council’s Twitter page (@PEGCCouncil) had more than 1,750 followers. PEGCC tweets are often retweeted by industry stakeholders including private equity executives, portfolio company CEOs and journalists. 3,100 The Council continues to share photos, videos and updates through its Facebook page, which has more than 3,100 “likes.” Mobilizing Portfolio Companies Connecting lawmakers with portfolio companies based in their districts is one of the most effective ways the PEGCC helps demonstrate the tangible impact that private equity creates in communities across the country. The PEGCC executed a record 80 meetings between portfolio company CEOs and policymakers such as Sen. Tim Kaine (D-VA), Rep. Jim Himes (D-CT), Sen. Dan Coats (R-IN), and Rep. Erik Paulsen (R-MN). This program has become essential to the PEGCC’s Congressional outreach and lobbying efforts. The Council has successfully organized nearly 200 meetings since beginning the program, and expects to redouble its efforts with the support of its membership. The PEGCC executed a record 80 meetings between Members of Congress and portfolio company CEOs. Through media outreach, the PEGCC was mentioned in more than 230 news stories. Looking Ahead 2014 promises to be a big year for the PEGCC. As the debate over tax reform continues to take shape, the Council will continue to vigilantly defend policies that encourage investment in America’s economy. The PEGCC will focus its efforts on providing clarity and real-life application for industry tax issues that are often mischaracterized by the media, and therefore misunderstood by the general public. As it has done since 2007, the Council will continue to work tirelessly to demonstrate the vital role the private equity industry plays in growing and creating more valuable companies across the country every day. Private Equity Growth Capital Council | 2013 Annual Report 9
  10. 10. Section 2 Government Affairs Early in 2013, the PEGCC recognized that it needed to dedicate substantial time and effort to ensure that the private equity industry remained well positioned on our three primary tax issues: carried interest and enterprise value; interest deductibility; and pass-through taxation. In addition, the PEGCC effectively engaged with Congress and regulators to advocate for appropriate policies that strengthen private equity and encourage investment. Ultimately, these efforts resulted in significant progress for PEGCC members on multiple fronts. Tax Policy Carried Interest: The PEGCC continued to educate Members of Congress on why carried interest is – and always has been – appropriately taxed as capital gains income. In April, the Council filed a comment letter with the House Ways and Means Committee defending its current tax treatment. Since 2007, the PEGCC’s consistent outreach has helped expand the ranks of legislators who support the industry position on carried interest. Senate Republican Leader Mitch McConnell (R-KY) speaks at the PEGCC’s Annual Meeting on September 19, 2013 10 Private Equity Growth Capital Council | 2013 Annual Report Interest Deductibility: As 2013 began, policy makers from both sides of the aisle indicated a possible desire to limit interest deductibility as part of comprehensive tax reform. The PEGCC strongly advocated for maintaining full interest deductibility
  11. 11. and worked with many allies on the Hill and in the larger business community by becoming a founding member of the BUILD Coalition. Combined with a targeted communications and research strategy, the BUILD Coalition held more than 60 meetings with tax policy leaders in the House and Senate during 2013, advancing the cause of maintaining full interest deductibility. In 2014, both the PEGCC and the BUILD Coalition will continue their efforts on this important issue. House Speaker John Boehner (R-OH) speaks at the PEGCC’s Annual Member Dinner on September 18, 2013 Pass-through Tax Treatment: The PEGCC continued to engage on Capitol Hill to prevent proposals that would tax pass-through businesses at the entity level. The PEGCC’s hard work paid off as bipartisan opposition to entity level taxes on pass-through businesses grew, and the Council expects that future debates on tax reform will continue to implicate pass-throughs and require the PEGCC’s attention. BUILD Coalition interest deductibility whiteboard video The PEGCC's consistent outreach has helped expand the ranks of legislators who support the industry position on carried interest. Private Equity Growth Capital Council | 2013 Annual Report 11
  12. 12. Sen. Michael Bennet (D-CO) (left) and former Sen. Evan Bayh (D-IN), senior advisor at Apollo Global Management, speak at the PEGCC’s Annual Meeting on September 19, 2013 Investment Adviser Registration The PEGCC worked to advance bipartisan legislation to remove unnecessary regulatory burdens imposed on private equity and growth capital by the Dodd-Frank Act. For the first time, the Small Business Capital Access and Job Preservation Act (H.R. 1105) passed the full House of Representatives in 2013. In 2014, the Council’s Government Affairs department will focus attention on advancing the proposal in the Senate. ■■ ■■ ■■ Regulatory Policy In 2013, the PEGCC filed five comment letters with multiple U.S. and foreign agencies, and conducted several in-person meetings with key regulators. The PEGCC Government Affairs department’s 2013 regulatory efforts included: ■■ 12 Aggressively advocating on behalf of the private equity industry around the Volcker Rule and the CFTC’s new proposed rule on aggregation of positions; Private Equity Growth Capital Council | 2013 Annual Report ■■ Joining the U.S. Chamber of Commerce to file comments on the re-proposed risk retention rules; Submitting a comment letter on the SEC’s proposed amendments to Regulation D, Form D and Rule 156 of the Securities Act; Successfully convincing the SEC’s Division of Investment Management to issue revised guidance that addresses some of the industry’s concerns on the Custody Rule; and Responding to interest by the SEC’s Division of Trading and Markets regarding whether private equity investment advisers should also have to register as broker-dealers in certain circumstances. Overall, the Council’s efforts have yielded positive results. For example, the final Volcker Rule regulations clarified that insurance company general accounts and separate accounts are not subject to the restrictions on investing in private funds. In addition, final Volcker Rule regulations clearly state that a banking entity is
  13. 13. not subject to the restrictions on investing in private funds where it is acting in a fiduciary or similar capacity on behalf of its customers. The final rules also preserve the ability of U.S. private equity firms to sponsor non-U.S. funds with investors that include non-U.S. banking entities and appear to preserve the flexibility of U.S. private equity firms to include such non-U.S. funds into parallel fund structures. Legal Advocacy In 2013, the PEGCC responded quickly when the First Circuit Court of Appeals held in Sun Capital Partners III, LP et al. v. New England Teamsters & Trucking Industry Pension Fund et. al., that a private equity fund sponsored by Sun Capital Partners constituted a “trade or business” for purposes of ERISA multi-employer pension withdrawal liability. The PEGCC filed two amicus curiae briefs – one with the First Circuit Court of Appeals and one with the U.S. Supreme Court – advocating that ERISA withdrawal liability under multi-employer pension plans should not apply to private equity funds. Looking Ahead While the PEGCC made progress on many issues in 2013, the regulatory calendar remains busy for 2014. The Council anticipates that regulators will issue several final rules within the next few months, including the CFTC aggregation rule and possibly incentive compensation rules. The PEGCC also expects that regulators will continue to examine other issues of importance to the industry, including some of the square peg/round hole problems with Investment Adviser Act applicability to private equity. Throughout this process, the PEGCC will remain actively engaged as appropriate with regulators, agency staffs and legislators on Capitol Hill. SEC Chair Mary Jo White speaks at the PEGCC’s Annual Meeting on September 19, 2013 The PEGCC expects that 2014 will be a year filled with political messaging more than legislative action due to the upcoming mid-term elections in November. There will likely be continuous discussions on job creation, income inequality, tax policy, and immigration reform, among many other topics. The PEGCC will remain actively engaged with regulators, agency staffs and legislators on Capitol Hill. Private Equity Growth Capital Council | 2013 Annual Report 13
  14. 14. Section 3 Research Research plays a critical role in illustrating how private equity and growth capital benefit the American economy, why it’s important to ensure that U.S. policies encourage investment, and how private equity performance benefits its investors. In 2013, research produced and promoted by the Council’s Research team focused on highlighting the role that private equity and growth capital plays in states and municipalities around the country, strengthening retirements for millions of Americans and growing businesses in communities of all sizes. Public Pension Fund Analysis The PEGCC’s second annual public pension fund analysis, released in October, found that private equity outperforms other asset classes, demonstrating the industry’s role in strengthening the retirement security for millions of Americans who rely on pension benefits. The report examined 146 U.S. public pension funds with assets greater than $1 billion, analyzed the asset allocation of these funds, and compared the performance of their private equity investments to other asset classes. The report then ranked the top 10 public pensions by private equity investment performance. Massachusetts PRIT took the top spot, based on a 15.4 percent annualized return over the past 10 years. 14 Private Equity Growth Capital Council | 2013 Annual Report The median pension fund received 10 percent from private equity annualized over 10 years, compared to 5.8 percent for public equity and 6.6 percent for fixed income during the same period. Information about the investment allocation and performance by asset class of the public pension funds used in the analysis is available to PEGCC members through the Council’s proprietary online database. Additionally, the PEGCC published a white paper – “LongTerm Commitments: The Interdependence of Pension Security and Private Equity” – based on the results of the first public pension study, highlighting the outperformance of private equity investment by pension funds and its importance to the retirement security of pension recipients.
  15. 15. economy and illuminating the diverse industries and regions that receive investment from the industry. Private Equity at Work: Strengthening Retirement for Millions of Americans Top 10 Pension Funds by Private Equity Return 1 1 Massachusetts Pension Reserves Investment Trust (PRIT) Fund 6 Iowa Public Employees' Retirement System 2 Los Angeles County Employees Retirement Association 7 San Francisco Employees' Retirement System 3 Teacher Retirement System of Texas 8 Utah Retirement System 4 Houston Firefighters' Relief and Retirement Fund 9 Pennsylvania Public School Employees' Retirement System 5 Minnesota State Board of Investment (Combined Funds) 10 Contra Costa County Employees' Retirement Association Pension funds’ investments in private equity outperform other asset classes based on median 10-year annualized returns 2 10-YEAR MEDIAN ANNUALIZED RETURN (%) PUBLIC EQUITY (STOCKS) 5.8% PRIVATE EQUITY 6.6% 6.7% FIXED INCOME (BONDS) REAL ESTATE 10.0% Asset Allocation by Total Dollars Invested on a Dollar-Weighted Basis 2.7% - Cash/Short-Term Investments 6.6% - Other 7.5% - Real Estate 10.3% - PRIVATE EQUITY 24.3% - Fixed Income Pension Funds invest 10.3% of their portfolio in private equity. 3 In the 2013 report, Texas received the most investment from private equity (measured in dollars invested) totaling $46.6 billion in 222 companies, followed by California, Colorado, Illinois and Florida. Colorado’s 6th Congressional District, represented by Rep. Mike Coffman, received $17.2 billion and ranks as the top district for private equity investment. Congressional districts represented by Reps. Sheila Jackson Lee (TX-18), Danny K. Davis (IL-7), Rodney Frelinghuysen (NJ-11) and Kenny Marchant (TX-24) rounded out the top five. The PEGCC’s interactive U.S. map also allows users to learn about private equity’s investment in their regions as well as their state pensions’ investments in private equity. 48.6% - Public Equity (Stocks) This analysis is based on data collected from the financial reports of 146 large public pension funds (with $1 billion or more in assets), where data were available at the time of the study (August 2013). Return figures for marketable securities are reported both net and gross of management fees. Return figures for private equity and other illiquid assets are typically reported net of management fees and carry. 1 The ranking of pension funds by private equity returns is based on a composite of 5- and 10-year annualized returns for pensions with more than ten years of investment in private equity. Reporting dates vary between June 30, 2012 and December 31, 2012. 2 Asset class returns are based on pension funds that reported 10-year annualized returns as of June 30, 2012. 3 The analysis of investment allocation is based on financial statements with reporting dates between March 31, 2012 and July 31, 2013, with most statements as of June 30, 2012. Public Pension Fund Analysis infographic Investment in States and Districts Released in June 2013, the third annual “Private Equity: Top States and Districts” report revealed that private equity firms invested $347 billion in more than 2,000 U.S.-based companies last year. The analysis ranked the top 20 states and Congressional districts receiving private equity investment in 2012 by investment value and the number of investments. The report highlights the magnitude of private equity investment nationwide, educating Members of Congress about how private equity drives growth in their local Private Equity in Your State Private Equity Growth Capital Council | 2013 Annual Report 15
  16. 16. Private Equity Trends & Performance To provide a snapshot of the private equity market, the PEGCC Research team tracks fundamental industry trends as well as the performance of fund investments through its quarterly reports. Colorado Ranks Third in PrivateEquity Investment Value in 2012 The “PEGCC Trends Report” examines quarterly changes in key industry activities, such as investments, exits and fundraising. The “PEGCC Performance Update” analyzes the outperformance of private equity compared to public equity, based on quarterly information from public pension funds and private equity benchmark providers. Each analysis is regarded as a leading indicator by private equity industry participants, and generates consistent media coverage. Michigan Private Equity Gains Ranking What Housing Congressional District Pulled in the Most PE Dollars? The Results Designed to educate the Council’s key audiences and provide clarity for sometimes complex concepts, the PEGCC’s research consistently receives positive feedback from lawmakers, industry thought leaders, journalists and others. In 2013, more than 100 national and regional outlets covered the PEGCC’s research, ensuring its visibility for an even wider audience. Looking Ahead 2014 will be an exciting year for PEGCC research. With several studies, analyses and partnerships with other esteemed organizations currently in the works, the PEGCC will continue to produce compelling and illustrative reports to further enhance efforts to communicate the valuable role the private equity industry plays in the American economy. 16 Private Equity Growth Capital Council | 2013 Annual Report Equity Firms Boost Pension Fund These Pension Funds Made a Killing with Private Equity Happ(ier) Returns
  17. 17. Section 4 Membership Services Increased engagement from PEGCC members directly improves the Council’s ability to be at the forefront of its legislative, regulatory and public affairs advocacy work, while providing members with increased value by expanding their network and pool of resources. The Council’s ever-expanding membership services program is fundamental to providing its members with the highest level of service and benefit. 2013 Activities The Council achieved many notable accomplishments in the area of Membership Services in 2013: Committee and Membership Activities: Activity levels for Committee functions and member calls have steadily increased. This includes more engagement of the CFOs’ Committee, Research-Investor Relations’ Committee, CCOs’ Working Group, and General Counsels’ Committee. Additionally, the Council held its first annual General Counsels’ Day on November 7, a well-received event featuring expert panelists from our Associate Member firms on the topics of fundraising trends, trends in deals, and SEC examinations, enforcement, and regulation. [From left] Rep. Robert Hurt (R-VA), House Financial Services Subcommittee Chairman Scott Garrett (R-NJ), outgoing PEGCC Chairman Mark Tresnowski, managing director and general counsel at Madison Dearborn Partners, and Robert Hull, CFO of Providence Equity Partners attended the PEGCC’s Annual Member Dinner on September 18, 2013 Private Equity Growth Capital Council | 2013 Annual Report 17
  18. 18. Annual Meeting and Member Dinner: Held annually in Washington, D.C., this year’s event kicked off with our Member Dinner featuring House Speaker John Boehner (R-OH), followed by the Annual Meeting, which included sessions with Sen. Michael Bennet (D-CO), Senate Republican Leader Mitch McConnell (R-KY), Rep. Richard Neal (D-MA), Rep. Steve Southerland, II (R-FL) and SEC Chair Mary Jo White. PEGCC member attendance increased by more than 30 percent in 2013, and the Council received a significant amount of positive feedback regarding the quality of the program. Membership Expansion: Membership expansion was a core objective for 2013, with the establishment of the new PEGCC Associate Member class. The details of this membership program were developed during the second quarter of the year, and outreach to trusted service providers began in early summer. The Associate Member class began with law firms, and expanded to accounting and valuation firms in the fall. The Council is proud to welcome its first 14 Associate Members, and looks forward to working with them in 2014 and beyond. 18 Private Equity Growth Capital Council | 2013 Annual Report Outgoing PEGCC Chairman Mark Tresnowski, managing director and general counsel at Madison Dearborn Partners, speaks at the PEGCC’s Annual Member Dinner on September 18, 2013
  19. 19. Current Membership Our Members ■■ ■■ ■■ ■■ ■■ ■■ ■■ ■■ ■■ ■■ ■■ ■■ ■■ ■■ ■■ ■■ ■■ ■■ ■■ ■■ ■■ ■■ ■■ ■■ ■■ ■■ ■■ ■■ ■■ ■■ ■■ ■■ ■■ ACON Investments American Securities Apollo Global Management ArcLight Capital Partners Bertram Capital Management The Blackstone Group Brockway Moran & Partners The Carlyle Group CCMP Capital Advisors Crestview Partners The Edgewater Funds Genstar Capital GTCR Hellman & Friedman Highstar Capital Irving Place Capital The Jordan Company Kelso & Company Kohlberg Kravis Roberts & Co. KPS Capital Partners Madison Dearborn Partners New Mountain Capital Providence Equity Partners The Riverside Company Silver Lake Sterling Partners Sun Capital Partners TA Associates Thoma Bravo TPG Capital Vector Capital Vestar Capital Partners Welsh, Carson, Anderson & Stowe Associate Members ■■ ■■ ■■ ■■ ■■ ■■ ■■ ■■ ■■ ■■ ■■ ■■ ■■ ■■ Cleary Gottlieb Steen & Hamilton Debevoise & Plimpton Deloitte EY Kirkland & Ellis KPMG Latham & Watkins Paul, Weiss, Rifkind, Wharton & Garrison Proskauer Ropes & Gray Sidley Austin Simpson Thacher & Bartlett Sullivan & Cromwell Vinson & Elkins Staff List ■■ ■■ ■■ ■■ ■■ ■■ ■■ ■■ ■■ ■■ ■■ Steve Judge, President and CEO Ken Spain, VP, Public Affairs and Communications Jason Mulvihill, General Counsel Langston Emerson, VP, Government Affairs Bronwyn Bailey, VP, Research Jennifer Colfelt, VP, Finance, Operations and Membership Christopher Krueger, Director, Grassroots and Outreach Noah Theran, Director, Communications Caroline Teh, Senior Researcher Marie Fenton, Executive Assistant to the CEO Mallory Denniston, Administrative Assistant Private Equity Growth Capital Council | 2013 Annual Report 19
  20. 20. PRIVATE EQUITY GROWTH CAPITAL COUNCIL 950 F Street, NW Suite 550 | Washington, DC 20004 Phone: (202) 465-7700 | Email: info@pegcc.org Follow us at @PEGCCouncil Visit us at www.pegcc.org and www.privateequityatwork.com

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