SEE WHATS NOTEWORTHY IN PRIVATE EQUITY THIS WEEK /// ISSUE 98
August 30, 2013
ParkNShop Buyout Valued at up to
USD 4 billion
Growth Ahead for USD 5.5 Trillion Alt Asset
Research Shows PE Fund Team Turnover Has
a Positive Effect
Emerging Markets PE Returns Solid in 2012
Under the Radar Buyout Teams Top Preqin’s
Quote of the Week: Venture Capital Evolution
PARKnSHOP BUYOUT VALUED AT UP TO
USD 4 BILLION
(Image Source: EPrequin
GROWTH AHEAD FOR USD 5.5 TRILLION
ALT ASSET INDUSTRY: PREQIN
This week’s buyout deal of the week in the news
is a multi-billion dollar auction underway for
ParknShop, owned by Hutchison Whampoa and
controlled Li Ka-shing, one wealthies men in
Asia, according to Reuters. The auction has
received at least seven offers for the Hong Kong
supermarkets business. Hutchison is seeking a
price of between USD 3 to 4 billion for the busi-
ness, which operates 345 stores in Hong Kong,
mainland China and Macau. The price may be
too high for private equity teams from KKR and
TPG, who are rumored to be bidding, according
to another article on Reuters.
The latest industry survey by Preqin sees a “hugely positive for the future of the alternatives industry”.
Allocations are set to increase or stay the same for more than 85% of those survey participants who
hail from a range of investor types, from family offices to pension funds. The positive sentiment among
this group is driven by satisfaction with returns they generated by their alternatives allocations, says
RESEARCH SHOWS PE FUND TEAM
TURNOVER HAS A POSITIVE EFFECT
New research from Europe is turning on its head the common wisdom that says that team stability
is important for performance and returns. Contrary to widely held beliefs, higher staff and executive
turnover equals improved private equity performance, say the report’s authors. There is now evidence
to support the theory that team evolution is necessary for continued performance, and it is based on a
data rich study of 145 senior fund management teams from around the world and dating back to 1990.
There is actually a much stronger link between staff turnover and positive performance than team sta-
bility, so LPs should be seeking what the researchers call team evolution, that is, a staff turnover of at
least 1%, according to research by Capital Dynamics and the London Business School’s Coller Institute
of Private Equity.
• Teams that experienced turnover from one fundraising to the next performed better on the next fund;
a 1% increase in turnover led to a 10% increase in subsequent net IRR.
• The average net IRR of fund managers with the highest turnover was 25% compared with 11.5% for
those with the lowest turnover.
• The impact on performance differed according to professionals’ backgrounds. Between funds, higher
turnover of professionals with operational backgrounds led to a significant improvement in perfor
mance, while the turnover of professionals with financial backgrounds did not impact performance.
• Fund managers with higher turnover during recessions performed better than those with lower turn
over; a 1% increase in turnover led to a 3.1% increase in net IRR.
Regulations, though a concern, do not seem
to be having any impact on investors’ plans for
new investments in the majority of cases, and
many are setting aside a significant amount of
capital for new alternative investments. Preqin
interviews and surveys fund managers, LPs,
and family offices to determine investor atti-
tudes to private equity, hedge funds, real estate
As the graph here illustrates, private equity is
doing very well on “exceeding expectations” and
the level of satisfaction on increased dramati-
cally in the past year.
EMERGING MARKETS PE RETURNS
SOLID IN 2012
Solid results and returns were reported for 2012 for Global (outside the US) developed and emerging
markets PE and VC investments. Both of these private fund classes earned their third quarter of posi-
tive growth for the year and each had double-digit gains as measured in U.S. dollar terms, according to
Cambridge Associates latest research. Although neither did as well as comparable public equity indi-
ces in 2012, the results looked better over longer periods, particularly at the three and five year mark,
according to Cambridge Associates.
UNDER THE RADAR BUYOUT TEAMS TOP
PREQIN’S NEW RANKING
Despite improvements made in the level of disclosure across the private equity industry, it remains
challenging for LPs and GPs to access reliable, accurate and fully transparent data necessary to effec-
tively benchmark funds. Lack of transparency in that regard is an oft-iterated criticism of PE. So when
Preqin published its new consistently out-performing fund managers ranking this summer, we took
notice, especially because it claims to draw on a significantly sized dataset.
There are a few surprises in the Preqin Consistent Performers in Private Equity Report, which covers
all the major segments of the global industry. Some of the name in distressed and buyout may sur-
prise, particularly in the US and UK buyout markets because they are under the radar, as far as press
coverage and branding are concerned. The top performers in VC were less surprising. For buyouts, the
best were Inﬂexion, Veritas Capital, Vista Equity Partners, and Wynnchurch Capital Partners. In the
venture capital sector the most consistent out-performers are Benchmark Capital, Pittsford Ventures
Management, and Sequoia Capital. ATP Private Equity Partners and NorthSea Capital, both from Den-
mark, along with Morgan Stanley Alternative Investment Partners are the top fund of fund managers.
Context: Money has become a commodity in venture capital business
and angels are getting all the good startups, says Griffith in a feature
article, and as a result VC is changing again. Over the years, VCs have
QUOTE OF THE WEEK: VENTURE CAPITAL
A whopping 70% of those with at least USD 1 million in assets that are
invested or available to invest, excluding home values, don’t consider
themselves to be wealthy... Rather, it’s only when they hit the USD 5 million
mark that millionaires begin to feel ‘wealthy’.
Who said it: CNN Money
“The dramatic drop in the cost of creating a company over the last
decade … has had an obvious effect on the venture capital world.
Serious venture investment is not required in the earliest stages of
a company’s life, so angel investors have been getting the best seed
had to adapt to changes in capital requirements and tech trends to attract the best entrepreneurs, as
the graphic here shows. They established brand names in the normally at that time secretive private
equity world, then they went international and on to create super-angel funds and accelerators. (See
Heardable for the top brands in VC in 2012) Now they are adapting again, especially some of the VC
Silicon Valley players. VC firms, like Andreessen Horowitz, have adopted agency-like models, where
they provide in-house PR, marketing and recruiting, while others have become community builders
enabling their portfolio companies to share knowledge and help each other, says Griffith. They are
even becoming publishers with professionally produced content on their websites. For example, An-
dreessen Horowitz hired Wired editor Michael Copeland and Battery Ventures hired former Wall Street
Journal reporter Rebecca Buckman.
Where we found it: Pando Daily
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