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RCP Believes the Lower Middle Market is an Inefficient Market in which Top-Tier Managers Have Historically Outperformed their Peers

The investment philosophy that runs through all of RCP’s activities is that smaller capitalization buyouts can produce superior returns to investors relative to other sectors within the private equity asset class. RCP’s goal is to have unmatched market knowledge, relationships and access, and investment selection skills within this large but relatively unknown market niche. RCP delivers middle market buyout investments to its limited partners through its family of primary funds-of-funds, its secondary funds, and its co-investment fund. RCP is a fully independent manager with a large dedicated team devoted solely to these activities. RCP also has a decade of experience which has deepened and refined the relationships and skills which make achieving its mission possible.

RCP believes that there are unique characteristics to the lower middle market that may result in superior investment performance compared to the larger end of the buyout market. Performance benchmarking data from Preqin indicates that buyout funds with less than $1 billion in capital have outperformed all other subsectors in private equity including larger buyout funds, venture capital and mezzanine over the last 20 years.*

In RCP’s opinion, current market conditions continue to provide an attractive opportunity for investment in lower middle market buyout funds in North America. The following are some of the key advantages that RCP believes exist in the lower middle market buyout sector:

  • a larger universe of investment opportunities

  • lower purchase price valuations

  • a relatively inefficient deal sourcing market

  • greater opportunity for growth and operational improvements

  • attractive exit options

  • incentives which better align the interests of managers with those of their limited partners


*Past performance does not predict, and is not a guarantee of, future results. RCP’s investment strategy is subject to significant risks and there is no guarantee that any RCP Fund will achieve comparable results as any prior investments or prior investment funds of RCP. Source: Preqin Top quartile North American PE Funds raised between 2004–2019; Net IRR by strategy – most up-to-date performance as of 8/30/23.

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