Read what's new and noteworthy in Private Equity this week.

1. DIGEST170
January 30, 2015
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Korean Sovereign Fund Expanding PE
Commitments and Prowess
LPs Prefer Small to Mid-sized Buyout Funds
Mid-Market Innovation: The PE/ESOP Hybrid
Top Fifteen in Fifteen: Kiplinger Highlights
Growth Businesses
Indian M&A Hits 3-year High
Quote of the Week: VC Meets Global Health
Philanthropy
Platform for fundraising & deal flow management

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Korean Sovereign Fund Expanding
PE Commitments and Prowess
Korea Investment Corp is hoping to double its allocation to alternative assets, including private equity,
in preference to stocks and fixed income this year. According to a WSJ interview with Chairman and
Chief Executive Hongchul Ahn, the figure will go from 8% to 20% by year end. Focus for investment
allocation is developed markets, US and European, due to their accounting standards and business
transparency, said Ahn. Both PE fund allocations and direct deals are on the agenda. Past returns for
its LP directs were not satisfactory so Ahn’s has been building up an internal research team and he
plans to expand it this year, he said. In that respect, it is following the Canadian model for direct in-
vestments.
Mid-Market Innovation: The PE/ESOP
Hybrid
We’ve heard of PE-backed
management buyouts, but
something new is employee
buyouts. Chicago-based Verit
Advisors, which has a track
record in such deals, says it’s
a growing trend and an exam-
ple of innovation in the mid-
market dealmaking segment,
according to Mary Josephs,
Founder and CEO of Verit Advi-
sors. Hybrid buyers are emerg-
ing that combine the “financial
firepower and operational
expertise of a high ¬quality
private equity firm” with the
Employee Stock Ownership
Plan (ESOP). A handful of PE players are willing to either invest in the company in a normal transac-
tion or as an ESOP-­private equity transaction. The ESOP is evident in all kinds of industries, according
to the National Center for Employee Ownership (NCEO), and stock owners include everyone from the
receptionist to the CFO. The largest employee owned business in the US has 160,000 employees. (Im-
age source: NCEO)

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Top Fifteen in Fifteen: Kiplinger
Highlights Growth Businesses
The businesses whose stocks have shown top performance con-
sistently over the past fifteen years, based on data from Morning-
star, are not tech stocks as we might expect given how often tech
companies appear in busi- ness media headlines, according to
Kiplinger.
Rather it is a diverse range of quick-growing businesses,
including one that sells cof- fee and coffee-related products,
to a high-end kitchen equip- ment manufacturer, the maker of
Uggs boots along with several healthcare and mining and energy
companies making the rank- ing too. The graphic here shows the
top performers from the end of 1999 through December 10, 2014.
Performance was measured based on total returns, dividends
included. Only companies with current market capitalizations of at
least USD 1 billion are includ- ed. The list excludes companies that
were acquired over the past 15 years.
(Image source: Kiplinger)
LPs Prefer Small to Mid-sized Buy-
out Funds
Small to mid-cap buyout funds
are the “most desired” fund type
at the moment, according to
Preqin’s Investor Intelligence’s
latest research note. The senti-
ment is clear amongst 5,583 LPs
active in PE that Preqin regu-
larly surveys with 49% believing
this fund type presents the “best
investment opportunities”.
About 40% state a preference for
buyout vehicles in general. Next
was fund of funds (15%), venture
capital (14%) and distressed
debt (12%), with growth and
large to mega buyout vehicles
each accounting for 11%. For those that like contrarian investments, cleantech was lowest in desir-
ability with only 2% believing it offered the best opportunities. (Image source: Preqin)

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Quote of the Week: VC Meets Global
Health Philanthropy
“Biotech start-ups have truly become R&D for big-pharma distribution. Even as a VC, I am shocked at
extent.”
Who said it: Bob More, Senior Advisor to Bill & Melinda Gates Foundation
In context: The trend referred to by Bob More here is the one that sees big
pharma groups acquiring nimble startups to add new biotechnology products,
markets, and business streams, rather than relying solely on internal R&D.
It is a trend that healthcare VCs are aware of and Bob More is an active VC
investor, despite his working for arguably the largest global health charity in
the world. Primarily a grant-making organization, Bill & Melinda Gates Foun-
dation started making equity investments in 2011 in life science startups in its
quest to eradicate diseases that it has on its hit list, such as polio and dengue.
Involving a charitable family foundation in a rate of return business is challenging, according to More in
a recent interview, facing the same kind of challenges initially that a limited partner does if they want
to do direct investments well. Bob More joined the Foundation in July 2013, after more than a decade
as VC. With VC investments in 25 companies, according to Crunchbase says, the Foundation has obvi-
ously built up an efficient team. The charity has USD 42.3 billion endowment with a billion and a half or
so added each year since 2006 from Warren Buffett, according to its website. (Image source: Bob More
on Twitter)
Where we found it: Twitter
Indian M&A Hits 3-year High
India’s M&A activity in 2014 climbed to USD 38 billion from
573 deals, according to new data from Grant Thornton. Pri-
vate equity deals came in at USD 12 bn up 23% measured by
deal value.
The analysis says that a consolidation trend amongst larger
companies drove activity. 2014 also witnessed one of the
lowest levels of outbound M&A by deal values at just USD
6 billion, although volumes remained robust at 117 deals.
Overseas investors continue to tap the potential in Indian
markets resulting in 35% increase in inbound values com-
pared to 2013 and 19% increase in volume of deals. Grant
Thornton expects 2015 activity to remain strong against a
backdrop of political stability, significant government re-
forms, falling commodity prices and minority foreign investors increasing control of their investments.
(Image source: Grant Thornton)

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