Since 2007, when it raised an 11.2 billion euro fund, 31 out of Apax's 50 partners have departed, according to company documents shared with investors that were reviewed by Reuters, and publicly available data. Over the same period, the firm has cut the number of partners to 35 and has replaced the heads of all five of its sector teams, according to the documents and the firm's website.

Apax, which is headquartered in London, has disclosed the departures to investors, and it has promoted from within and made new hires to fill some vacancies created by the turnover. But in at least one case, Apax asked a dealmaker to "keep silent" about plans to leave until a more opportune time in its fundraising, a former partner who requested anonymity said. The former partner added that Apax alerted investors only after news of the planned departure leaked.

Private equity executives and experts said that while there is no reliable industry average for turnover at the partner level, Apax's numbers were high. Turnover is an important consideration for private equity fund investors, who are asked to tie up their money for an average of 10 years.

"This is a lot of turnover," said Steven Kaplan, a University of Chicago finance professor whose research focuses on private equity. "When investors give them money, they do so because they are investing in the team and certainly at the senior partner level they don't expect to see a lot of turnover."

Apax declined several requests to comment on specific questions for this article. In a statement, the firm said: "Apax operates to the highest standards of integrity and transparency. Our investors are sophisticated institutions, which conduct detailed due diligence on all aspects of the firm, including our team, performance, strategy and governance. We maintain an excellent team and strong relationships with our investors, which have been integral to the success of our business over the past 30 years."

Apax oversees more than 27 billion euros in assets in a series of private equity funds and competes with Blackstone Group (BX.N), Carlyle Group (CG.O) and other big private equity firms for multibillion-dollar deals to buy companies. Its investors, called limited partners, or LPs, include pension funds, sovereign wealth funds and university endowments, which have varying degrees of sophistication and resources.

Even though Apax is privately held, the firm invests money that ultimately belongs to hundreds of millions of people around the world, from retired fire and police officers in California to university lecturers in Australia.

Apax Europe VI and Apax Europe VII, which were launched in 2005 and 2007, respectively, were ranked in the second quartile as of the end of September, putting them among the top 25 percent to 50 percent of performers across the private equity industry, according to market research firm Preqin.

The Apax documents reviewed by Reuters provide a rare look at the inner workings of the secretive private equity industry. They show that as of the end of last year, Apax Europe VII was valued at 1.23 times its cost. The firm has told investors it expects to see that eventually increase to between two and 2.2 times. Apax Europe VI, similarly, was valued at 1.44 times its cost. Apax sees that increasing to up to two times by the time all investments from the fund are realized.

These returns are lower than those from the fund Apax raised in 2001. Apax Europe V has returned 2.3 times, and Apax has said it would reach 2.5 times by completion in April 2013, the documents show. Apax Europe V's performance puts it among the top 25 percent of all private equity funds, according to Preqin's ranking of buyout funds across the industry.

MORE TURNOVER MAY BE AHEAD

Apax has told investors that it replaces underperformers, people familiar with the matter said, raising the possibility that more turnover may be ahead for the firm.

To be sure, Apax has experienced some of the same challenges that others in the private equity industry faced after the financial crisis of 2008, as it became expensive to borrow money to do deals, markets see-sawed and valuations of companies fell. The European debt crisis has added to the industry's problems.

The information about turnover and performance comes at a sensitive time for Apax. One hundred thirty-three potential investors have been combing through Apax's books and another 280 were planning to do so as of the end of March, as they decide whether to invest in Apax Europe VIII, the firm's latest buyout fund, the documents show. The fund, which has already raised 4.3 billion euros out of its 9 billion euro target, is the third-largest buyout fund currently raising money, ranking behind ones sponsored by Blackstone and Warburg Pincus.

"LPs care a lot about the turnover of the firm because the past does not tell you how you are going to do in the future if you lose a lot of partners," an Apax investor said.

One reason behind Apax's high turnover is its aggressive career management policy. Martin Halusa, the firm's Austrian chief executive, who took over the reins in 2004, has argued that vacancies allow for younger talent to rise through the ranks, investors said.

In a sign of how much some investors care about stability, they have asked 57-year-old Halusa to stay with the firm for much of the 10-year investment period of Apax Europe VIII, even though it would mean his staying beyond the age of 60, when most partners retire, people briefed on the matter said. Halusa has agreed to stay on, they said. Halusa did not respond to an email seeking comment.

Apax has also gone through a major transformation, which typically increases turnover. Over the years, the firm has moved away from venture capital investments to focus on buyouts. And in 2005, it merged with New York-based private equity firm Saunders Karp & Megrue. Also six of its partners have retired in the last five years, the documents show.

In addition, some former partners told Reuters they left because they did not make equity partners, which would have given them a share of profits and management fees potentially running into millions of dollars.

In Apax Europe VII, for example, 14 equity partners get between 1.65 percent and 5.89 percent of the carried interest, or the firm's profit from deals, while 24 non-equity partners get between 0.63 percent and 1.38 percent of the carried interest.

PARTNER PERFORMANCE

A Reuters analysis of Apax data of how its various deals have performed shows that seven of the 10 partners who took over as co-heads of Apax's sector teams have better investment records than the people they replaced.

Based on the investment multiple, the top three performers are John Megrue, Andrew Sillitoe and Michael Phillips. They did not respond to emails seeking comment.

Three of the new sector co-heads have performed worse, based on both the number of euros returned and investment multiples. (For an interactive graphic, click on r.reuters.com/vug48s)

The three - Khawar Mann and Buddy Gumina of healthcare and Oriol Pinya of the retail and consumer group - have achieved lower investment returns on the deals they led as partners than the people they replaced. Mann and Pinya have accumulated losses, although some are unrealized, the analysis shows.

The analysis uses Apax valuations as of the end of December and the firm's own attribution of deals to partners as communicated to investors. It focuses on two criteria - the absolute number of euros the partners returned from deals they worked on and the multiple of invested capital generated as proceeds, based both on realized and unrealized gains.

Independent industry experts said there is no standard metric used in the sector to measure performance but the method used in the Reuters analysis was a good proxy for performance. Apax did not comment on the relative role of the partners in deals or disclose the methodology it uses to evaluate partners.

The calculations shows Pinya had realized and unrealized proceeds of 1.26 billion euros on an initial total investment of 1.35 billion euros, representing an investment multiple of about 0.9 times. His predecessor, Alex Fortescue, had achieved a multiple of about 1.5 times by earning proceeds of 1.20 billion euros on a total initial investment of 798 million euros.

In the healthcare team, Mann, one of the co-heads to replace Ian Jones, had 740 million euros of realized and unrealized proceeds on an initial investment of 1.22 billion euros, representing an investment multiple of about 0.6 times, making him the worst-performing sector head based on those metrics.

Jones, who is still with Apax heading an unofficial energy group looking for energy investments, returned proceeds of 1.92 billion euros on an initial investment of 548 million euros, an investment multiple of 3.5 times, the analysis shows. Gumina, the other co-head in healthcare, has also fared worse than Jones on this basis, achieving proceeds of 2.27 billion euros on an initial investment of 1.53 billion euros for an overall multiple of about 1.5 times.

Mann, Gumina, Jones, Pinya and Fortescue did not respond to requests for comment.

Apax's healthcare team, which used to be one of the largest in the private equity industry, lost another partner in March, when Bill Sullivan in New York left. Sullivan declined to comment.

The healthcare team had returned 4.1 times the money it invested on realized buyouts as of the end of June 2011. But Apax has told investors that its current healthcare portfolio will not deliver such returns.

The healthcare portfolio is marked at its original investment value as of the end of December and Apax projects a 1.6 times total return under its base case and 2.2 times return under its upside scenario, the Apax documents show.

(1 euro = $1.244)

(Additional reporting by Cezary Podkul in New York; Editing by Paritosh Bansal, Alwyn Scott and Steve Orlofsky)

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