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The market for private assets, i.e., the buying and selling of private companies, makes up a large portion of global financial markets, both in terms of asset values and the amount of new capital raised. However, there is a clear absence of a private company-specific classification scheme to clarify the contents of private portfolios and precisely define a private investment. Currently, investors rely on existing industry classification schemes that only consider the company’s activity and hence are inadequate at capturing other important risk factors for private companies. To value private companies more frequently and with scarce pricing data, categories beyond industrial activity are needed that can capture additional risk factors with available information.

The PrivatE Company Classification Standard (PECCS™) has been created by the EDHEC Infra and Private Assets Research Institute to provide investors with a multi-dimensional classification scheme for private companies. PECCS™ comprises five pillars, namely, the industrial activity of the private company, its lifecycle phase, revenue model, customer model, and value chain type. These pillars help create peer groups of companies exposed to similar systematic factors, thus maximising the insights one can draw about private companies while dealing with limited data availability in private markets. With such informative groupings based on PECCS™, investors can improve allocation, performance monitoring, risk management, and benchmarking for private companies.

PECCS™ is also reviewed regularly to accommodate changes and evolution in the markets and business models. Governance of PECCS™ is established through a PECCS™ Review Committee that comprises asset owners, regulators, and academics.

MAY 2024

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