The PECCS™ classification utilizes company descriptions alongside machine learning to attribute classes across its five pillars, unlike GICS, which primarily focuses on a single industry classification.

Here’s a detailed comparison:

• PECCS Classification Methodology: When computing shadow prices, PECCS™ classes are attributed across five pillars using machine learning and company descriptions. This involves a holistic assessment of a company, making it easier to understand risks and find appropriate benchmarks and comparables for valuation. The five pillars include: industrial activity, lifecycle phase, revenue model, customer model, and value chain. Each of these pillars has clearly defined, mutually exclusive, and comprehensive classes into which private companies can be easily assigned.
• GICS (Global Industry Classification Standard) Methodology: Taxonomies used for publicly listed companies, like GICS, focus primarily on industrial activity, over-emphasizing this aspect while potentially ignoring other risk factors that are very important for private companies without valuation histories. GICS is designed to categorize companies based on their primary business activity.
• Key Differences:

• • Scope of Classification: PECCS provides a holistic assessment by classifying companies across five pillars. GICS, on the other hand, primarily focuses on industry classification.
  • Data and Methods: PECCS uses machine learning and company descriptions to attribute classes across its five pillars. GICS relies on analyzing a company’s primary revenue source to determine its industry classification.
  • Risk Factor Consideration: PECCS considers a broad range of risk factors beyond industrial activity, which is crucial for private companies. GICS mainly focuses on industry-specific factors.
  • Focus on Private vs. Public Markets: PECCS is tailored for private companies, capturing various dimensions of risk factors affecting their valuation. GICS is designed for publicly listed companies.
  • Application of Machine Learning: PECCS employs machine learning to enhance the accuracy and depth of its classifications. GICS does not explicitly mention the use of machine learning in its classification process.

• Benefits of PECCS™ over GICS for Private Companies:

• • Comprehensive Risk Assessment: PECCS covers a broader range of risk factors beyond industrial activity. This provides a more comprehensive understanding of a company’s risk profile, which is essential for accurate valuation and benchmarking.
  • Tailored for Private Markets: PECCS is designed specifically for private companies, addressing the unique challenges and characteristics of these entities. GICS, being designed for public companies, may not adequately capture the nuances of private firms.
  • Improved Valuation Accuracy: By considering multiple dimensions such as revenue model and customer model, PECCS enhances the accuracy of valuation predictions. Ignoring these factors, as often happens with GICS, can lead to significant errors in valuation.
  • Better Comparables: PECCS enables the identification of more relevant comparables by considering various factors beyond just the industry. This leads to more meaningful comparisons and better investment decisions.
  • Adaptability to Sector Changes: PECCS accounts for sector-wide changes by integrating variables that capture the impact of such changes on asset prices within specific PECCS segments. This adaptability ensures that the classification remains relevant even as market dynamics evolve.

• Illustrative Example: In assessing a technology company, GICS would primarily classify it based on its industry (e.g., software, IT services). In contrast, PECCS™ would additionally classify it based on its lifecycle phase (e.g., growth, mature), revenue model (e.g., subscription, advertising), customer model (e.g., B2B, B2C), and value chain (e.g., products, services). This multi-faceted classification offers a more detailed and nuanced understanding.

In summary, PECCS utilizes company descriptions and machine learning to provide a comprehensive, multi-dimensional classification tailored for private companies, while GICS focuses predominantly on industry classification for public companies.