Private Equity and Emerging Domestic Markets

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Private Equity and Emerging Domestic Markets

  1. 1. Private Equity and Emerging Domestic Markets Marcellus Taylor Aldus Equity April 25, 2006
  2. 2. <ul><li>Aldus Equity is a private equity consulting and fund-of-fund firm with a specialty practice focused on Emerging Private Equity Funds </li></ul><ul><li>The firm has invested over $350 million into 14 different emerging private equity funds </li></ul><ul><li>Aldus manages a $375 million emerging manager program on behalf of New York Common Retirement </li></ul><ul><li>The firm has over $2 billion of total assets under management </li></ul><ul><li>Key clients include: CalPERS, New York City Retirement, New Mexico, Louisiana State Employees, San Antonio Fire & Police </li></ul>Aldus Equity
  3. 3. Emerging Private Equity Market Reaching a Critical Mass Critical Mass of Assets Large Sub-Sectors Significant Players Source: Council of Urban Investors Institute
  4. 4. Pension Funds Investing in Emerging Private Equity Funds Formal Emerging Programs Public Pensions Corporate Pensions
  5. 5. <ul><li>Access to differentiated deal flow which enhances diversification and reduces total portfolio risk </li></ul><ul><li>Emerging funds have proven ability to generate proprietary deal flow </li></ul><ul><li>Emerging funds have a stronger sense of alignment with LP’s </li></ul><ul><ul><li>Can’t generate wealth through excessive management fees </li></ul></ul><ul><ul><li>Typically more motivated and hungry than established firms </li></ul></ul><ul><li>Provides opportunity to cultivate long-term relationships with tomorrow’s private equity stars </li></ul><ul><ul><li>Ensures strong access to best performing future funds </li></ul></ul>Benefits of Investing In Emerging Private Equity Funds
  6. 6. <ul><li>Historically, many of the most successful private equity firms achieved strongest performance investing first or second funds </li></ul><ul><li>A recent Kaufman Foundation study revealed that minority private equity firms generated an average IRR of 23.9% </li></ul>Why Invest in Emerging Managers? Sources: Kauffman Foundation: “Minorities and Venture Capital: A New Wave in American Business”. Kaufman survey of 24 minority-focused firms making investments during the 1989-1995 period. Private Equity Intelligence, Ltd., Fund private placement memos. Emerging Managers Have Demonstrated an Ability to Generate Strong Returns
  7. 7. <ul><li>Individual Track Record Analysis </li></ul><ul><ul><li>Investment performance at prior firms </li></ul></ul><ul><ul><li>Attribution Letters </li></ul></ul><ul><ul><li>Extensive reference checks </li></ul></ul><ul><li>Team Cohesion and Team Stability </li></ul><ul><ul><li>Previous working relationships and shared experiences </li></ul></ul><ul><ul><li>Broad ownership across the partnership </li></ul></ul><ul><li>Access to Quality Deal Flow </li></ul><ul><ul><li>Successful deal sourcing at prior firms </li></ul></ul><ul><ul><li>Preliminary deal pipeline report </li></ul></ul><ul><li>Comprehensive Investment and Due Diligence Process </li></ul><ul><ul><li>Systematic approach to evaluating deals </li></ul></ul><ul><ul><li>Sufficient documentation and analysis throughout the process </li></ul></ul>How to Evaluate Emerging Private Equity Funds Critical Due Diligence Items
  8. 8. <ul><li>Emphasis on generating strong returns should never be compromised </li></ul><ul><li>Thorough due diligence is critical </li></ul><ul><li>Requires a specialized advisor who has experience investing in a diversified pool of Emerging Funds </li></ul><ul><li>Investors should maintain a “portfolio” driven approach to investing in Emerging Funds </li></ul><ul><ul><li>Diversified across key sub-strategies </li></ul></ul><ul><ul><li>Sufficient vintage year diversification </li></ul></ul>Keys to Investing in Emerging Private Equity Funds

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