Is all that glitters gold? An interview-based qualitative study of how investment professionals evaluate and use alternative performance metrics in their investment decision-making process

Abstract: This paper explores how investment professionals evaluate and use alternative performance metrics (APMs) in their investment decision-making process. We adopt a qualitative inductive interview approach to investigate the informative and opportunistic perspectives on APMs. Our research collects data from ten private equity investors to add to the qualitative body of literature on APMs. While APMs can provide investors with valuable insights into a company's underlying performance, previous research has also identified that they may be reported with an intent to mislead investors. Therefore, our study aims to investigate potential risks associated with APMs by understanding how investors evaluate and use these metrics. Our findings reveal that investors use APMs to understand the performance of potential targets. What APMs that are used varies between investors and so does the definition and understanding of these metrics. Additionally, the way in which investors evaluate APMs varies between the different phases of the investment process and whether the process is structured or unstructured.