This document discusses how hedge fund-backed reinsurers can generate assets under management (AUM) and permanent capital for asset managers. It provides the following key points:
1) Reinsurers offer investors higher potential returns than funds due to embedded leverage, as well as improved liquidity and potential tax benefits if structured properly.
2) Asset managers benefit from raising new AUM, obtaining permanent capital that is not subject to redemptions, and earning additional fees from the "free money" of premiums invested.
3) While establishing a reinsurer requires significant time and costs, the benefits can outweigh these hurdles for large asset managers, especially if using experienced advisors. Suitable
Intro to Asset Manager Sponsored ReinsurersJoe Taussig
1) The document discusses sponsored reinsurers as a way for asset managers to raise assets under management, acquire permanent capital, and outperform funds with identical investment strategies.
2) It describes the benefits for asset managers, including obtaining capital from new sources, monetizing their business, increasing higher quality fees, and obtaining permanent capital.
3) The document also outlines the benefits for investors, such as near-certain outperformance versus funds, potential for a publicly traded security with daily liquidity, and no annual taxes on earnings for US investors.
The venture capital industry is high risk, with many startups failing but massive gains concentrated in a few top deals. Venture capitalists raise funds to invest in new companies, adding value through participation. Their business model leverages multiple failures through segmented investing, deal structures that protect investors, sharing deals among firms, and a portfolio approach that absorbs failures. Their intensive investment process is designed to avoid losers while allowing participation in potential home runs.
Ashton Global is an emerging manager platform that specializes in niche investment strategies related to small-cap stocks and special situations.
Kijana Mack – Senior Managing Director, Portfolio Manager
Kijana has 14 years of experience in institutional investment management and corporate finance. He is responsible for overall enterprise risk and portfolio risk management at Ashton Global.
https://soundcloud.com/user-364986019/kijana-mack-interview-about-emerging-managers
Topics Discussed:
- What is Venture Capital
- Overview of VC Funds
- VC Investment Process
- VC Investing Strategies
- Other Investors
- VC Fundraising Materials
- Resources
Ashton Global Emerging Manager Hedge FundsKijana Mack
Kijana Mack is the Founder and Senior Managing Director at Ashton Global
https://kijanamack.com/
Kijana A. Mack, an expert in the global finance and energy sectors.
Please email kijana.mack@gmail.com for more information.
This document provides an overview of wealth management strategies for affluent investors, focusing on hedge funds and private equity. It discusses what hedge funds and private equity are, common characteristics and strategies, manager incentive structures, historical returns, and implementation considerations. It also reviews endowment models, summarizing historical investment returns and asset allocations of Yale and Harvard University endowments. Finally, it compares different methods of investing and five key considerations for selecting investment types - management, taxation, costs, control, and liquidity.
From Bootstrapping to Venture Rounds: A Startup Case StudyRoger Ehrenberg
The document provides an overview of the different stages of startup funding: bootstrapping, angel rounds, seed rounds, and venture rounds. It discusses the characteristics of each stage, when they typically occur, the typical amount of funding, and the tradeoffs involved. It emphasizes the importance of understanding the company's goals before taking external capital and performing diligence on potential investors. The case study describes funding the ad tech company The Trade Desk in 2009 when the industry was considered crowded and venture appetite was low. It prompts evaluating whether one would invest in the company based on the presented information and environment.
Nurture Talent Academy conducted InvestorYatra for startups in Delhi, Gurgaon and Noida in July 2013. 25 entrepreneurs visited investors offices like TLabs, GSF Accelerator, SAIF Partners and Canaan Partners to learn all about incubators, accelerators, angel investors and venture capital. Every session had an investor share insights on a startup topic - this presentation contains specifics about term sheet and agreements shared by Nishant Verman of Canaan Partners. Check out more on www.investoryatra.com.
Intro to Asset Manager Sponsored ReinsurersJoe Taussig
1) The document discusses sponsored reinsurers as a way for asset managers to raise assets under management, acquire permanent capital, and outperform funds with identical investment strategies.
2) It describes the benefits for asset managers, including obtaining capital from new sources, monetizing their business, increasing higher quality fees, and obtaining permanent capital.
3) The document also outlines the benefits for investors, such as near-certain outperformance versus funds, potential for a publicly traded security with daily liquidity, and no annual taxes on earnings for US investors.
The venture capital industry is high risk, with many startups failing but massive gains concentrated in a few top deals. Venture capitalists raise funds to invest in new companies, adding value through participation. Their business model leverages multiple failures through segmented investing, deal structures that protect investors, sharing deals among firms, and a portfolio approach that absorbs failures. Their intensive investment process is designed to avoid losers while allowing participation in potential home runs.
Ashton Global is an emerging manager platform that specializes in niche investment strategies related to small-cap stocks and special situations.
Kijana Mack – Senior Managing Director, Portfolio Manager
Kijana has 14 years of experience in institutional investment management and corporate finance. He is responsible for overall enterprise risk and portfolio risk management at Ashton Global.
https://soundcloud.com/user-364986019/kijana-mack-interview-about-emerging-managers
Topics Discussed:
- What is Venture Capital
- Overview of VC Funds
- VC Investment Process
- VC Investing Strategies
- Other Investors
- VC Fundraising Materials
- Resources
Ashton Global Emerging Manager Hedge FundsKijana Mack
Kijana Mack is the Founder and Senior Managing Director at Ashton Global
https://kijanamack.com/
Kijana A. Mack, an expert in the global finance and energy sectors.
Please email kijana.mack@gmail.com for more information.
This document provides an overview of wealth management strategies for affluent investors, focusing on hedge funds and private equity. It discusses what hedge funds and private equity are, common characteristics and strategies, manager incentive structures, historical returns, and implementation considerations. It also reviews endowment models, summarizing historical investment returns and asset allocations of Yale and Harvard University endowments. Finally, it compares different methods of investing and five key considerations for selecting investment types - management, taxation, costs, control, and liquidity.
From Bootstrapping to Venture Rounds: A Startup Case StudyRoger Ehrenberg
The document provides an overview of the different stages of startup funding: bootstrapping, angel rounds, seed rounds, and venture rounds. It discusses the characteristics of each stage, when they typically occur, the typical amount of funding, and the tradeoffs involved. It emphasizes the importance of understanding the company's goals before taking external capital and performing diligence on potential investors. The case study describes funding the ad tech company The Trade Desk in 2009 when the industry was considered crowded and venture appetite was low. It prompts evaluating whether one would invest in the company based on the presented information and environment.
Nurture Talent Academy conducted InvestorYatra for startups in Delhi, Gurgaon and Noida in July 2013. 25 entrepreneurs visited investors offices like TLabs, GSF Accelerator, SAIF Partners and Canaan Partners to learn all about incubators, accelerators, angel investors and venture capital. Every session had an investor share insights on a startup topic - this presentation contains specifics about term sheet and agreements shared by Nishant Verman of Canaan Partners. Check out more on www.investoryatra.com.
Case study on financing capital for a new startupAmitava Sengupta
The document discusses various funding options for a large industrial gases company that needs Rs. 500 cr to install a new oxygen plant. The finance manager evaluates equity capital, retained earnings, debentures, bank loans, trade receivables and a new contract's assured cash flows. Combining rights share issuance, mid-term loans, retained earnings, factoring, securitization and equity with differential voting rights raises Rs. 513.5 cr, fulfilling the target amount. Internal sources and bank financing involve less risk than equity dilution or high-cost debt.
Professional share investment advice to learn and earnindicemaster
We are SEBI approved investment advisor. We are the business magnet for the traders and investors who deal in the stock market and provide best stock trading investment advice. Visit now for more Information :- http://www.indicesmaster.com/
netwealth educational webinar - The evolution of asset allocationnetwealthInvest
On April 14, 2016 Tracey McNaughton, Head of Investment Strategy at UBS presented to financial advisers on the evolution of asset allocation during a netwealth educational webinar.
1. The document outlines the key decisions and principles of financial management. It discusses 10 principles of financial management including risk-return tradeoffs, time value of money, and efficient capital markets.
2. Financial managers are responsible for investment, financing, and asset management decisions. Investment decisions involve allocating money to maximize value, financing decisions cover obtaining and structuring financing, and asset management focuses on efficient use of assets.
3. Financial management aims to efficiently manage an organization's funds to achieve its goals. It involves planning, directing, and controlling financial activities and resources.
On Thursday, April 27th, 2017, we heard from Windham's own client consultant, Jon Kazarian about best methods and practices for the portfolio construction and evaluation process.
The document provides an overview of how venture capital funds work, including:
1) Venture capital funds raise money from limited partners like pension funds and endowments and invest in companies.
2) Funds are organized as limited partnerships with general partners who manage the investments and seek high returns.
3) General partners are incentivized to find companies that can generate large returns in order to receive carried interest from highly profitable deals.
Gs503 VC industry players lecture 1 120115Stephen Ong
This document provides an overview of the venture capital industry and players. It defines what a venture capital firm is and explains their role in investing in private companies and actively monitoring portfolio companies. The document outlines the typical stages of venture capital funding and discusses key terms like limited partners, committed capital, and carried interest. It also examines trends in the global venture capital industry and remaining challenges for international venture capital markets.
The document summarizes Wells Fargo's small cap value equity investment strategy. It introduces the investment team and describes their philosophy of investing in undervalued small cap companies. It then outlines their three-step investment process of quantitative screening, fundamental research, and portfolio construction to select between 90-125 holdings while controlling risk. The team seeks to add value through bottom-up security selection and applying their process consistently over the long term.
This document discusses venture capital and angel financing. It defines venture capital as money provided by investors to start-ups and small businesses with long-term growth potential. Venture capital financing is high-risk but can have high rewards. Angel financing refers to early investments from individuals, usually friends or family of the entrepreneur. The document outlines the stages of venture capital funding, advantages and disadvantages, as well as how venture capital firms and angel investors operate.
The SF portfolio of funds provides investors with three funds of funds (SF Cautious, Positive, and Adventurous) that cater to different risk tolerances. The funds invest in a variety of underlying funds across asset classes and geographies to diversify risk. Performance has weathered market volatility since 2008 due to attention to downside risk, quality fund selection, and taking advantage of opportunities. The funds aim to outperform over the long-term by investing in undervalued assets rather than chasing short-term momentum. Research involves scrutinizing funds and understanding their strategies and economic backdrops. The funds are suitable for medium to long-term investors comfortable with some volatility.
Louis lagassé-The seven drivers of valueLouis Lagassé
A shareholder is any person, company or other institution that owns at least one share of a company’s stock. Because shareholders are a company's owners, they reap the benefits of the company's successes in the form of increased stock valuation. If the company does poorly, however, shareholders can lose money if the price of its stock declines.
The beginners guide to venture capital by jimmy stepanianJimmy Stepanian
As a technology company, I like the idea of bootstrapping. In fact, that is how we are building I Like Fashion Retail as a company. We are bootstrapping my business thus far
Asset Allocation in Taxable PortfoliosWindham Labs
On Tuesday, September 26th, we hosted Lucas Turton for a discussion on Asset Allocation in Taxable Portfolios. Lucas explored how to estimate the future value of a portfolio by considering assets on an after-tax basis, asset allocation and location for optimal tax efficiency, and best practices for tax loss harvesting and navigating the wash sale rule.
Venture capital (VC) is a form of private equity and a high-risk, high-return investment. VCs typically invest in startups that cannot raise traditional financing. They expect to lose their entire investment in 1/3 of companies, break even in 1/3, and generate returns from 1/3. VCs raise funds in cycles and have time-bound commitment and investment periods. They earn management fees and carried interest. Associates source deals and manage investments while partners make decisions. VCs prefer different stages and seek influence, liquidation preferences, and exist their investments through dilution or acquisition. There are also angel investors, accelerators, incubators, and corporate VCs that startups may encounter.
Different Startup Funding Stages : How Funding WorksmyHQ
The document outlines the different stages of startup funding: seed capital from friends and family; angel funding from wealthy individual investors; venture capital from firms in multiple rounds (Series A, B, C, etc.); mezzanine financing and bridge loans prior to an IPO; and finally an IPO where the company sells shares to the public. It explains that contrary to common misconceptions, startups can and do utilize various external sources of funding beyond the initial seed stage as the company grows and progresses through different valuation levels over time.
Have you ever looked at the news, or at a company’s results, and have had no idea what they mean or how to interpret it?
You know there’s information lurking deep down in the results that you could use to profit from, but you’re never sure where to look. Or exactly what to look at!?
And with reporting season around the corner, just imagine the profit opportunities you could uncover before any other investor if you knew how.
That’s why I want to give you the reporting strategy that you could use to read financial results like a pro.
Asset Allocation for Specific Client GoalsWindham Labs
On Wednesday, January 24th, we heard from Senior Client Consultant Jon Kazarian on how to tailor a portfolio to meet the specific investment goals of a client.
Pegasus Capital Inc is launching a $150M distressed debt fund focused on oil and gas companies. The fund will target returns of 12-20% with a target Sharpe ratio of 1.5. It will take a proprietary approach of conducting in-depth research on issuers impacted by low oil prices to identify underpriced securities. The fund aims to mitigate risk through hedging strategies and due diligence of counterparties.
Investment management is a key function for insurance companies to manage investments backing reserves and capital. Zurich Insurance Group commissions its investment management team to generate superior risk-adjusted returns relative to liabilities for shareholders and policyholders. Investment management creates value through a process that includes asset-liability management, strategic asset allocation, market strategy, asset manager selection, portfolio construction, and efficient asset management. The investment strategy aims to maximize economic objectives while minimizing unrewarded risks in order to create long-term value for stakeholders.
The document discusses various sources of finance for new businesses, including owner's funds, friends and family, bank loans, overdrafts, initial public offerings, retained profits, business angels, venture capitalists, government grants and loans, Islamic finance instruments, and how much capital is needed for non-current and current assets. It provides details on the advantages and disadvantages of different sources of finance like bank loans, overdrafts, leasing, hire purchase, and retained profits. It also discusses factors to consider when determining how much capital is required at different stages of a business.
Case study on financing capital for a new startupAmitava Sengupta
The document discusses various funding options for a large industrial gases company that needs Rs. 500 cr to install a new oxygen plant. The finance manager evaluates equity capital, retained earnings, debentures, bank loans, trade receivables and a new contract's assured cash flows. Combining rights share issuance, mid-term loans, retained earnings, factoring, securitization and equity with differential voting rights raises Rs. 513.5 cr, fulfilling the target amount. Internal sources and bank financing involve less risk than equity dilution or high-cost debt.
Professional share investment advice to learn and earnindicemaster
We are SEBI approved investment advisor. We are the business magnet for the traders and investors who deal in the stock market and provide best stock trading investment advice. Visit now for more Information :- http://www.indicesmaster.com/
netwealth educational webinar - The evolution of asset allocationnetwealthInvest
On April 14, 2016 Tracey McNaughton, Head of Investment Strategy at UBS presented to financial advisers on the evolution of asset allocation during a netwealth educational webinar.
1. The document outlines the key decisions and principles of financial management. It discusses 10 principles of financial management including risk-return tradeoffs, time value of money, and efficient capital markets.
2. Financial managers are responsible for investment, financing, and asset management decisions. Investment decisions involve allocating money to maximize value, financing decisions cover obtaining and structuring financing, and asset management focuses on efficient use of assets.
3. Financial management aims to efficiently manage an organization's funds to achieve its goals. It involves planning, directing, and controlling financial activities and resources.
On Thursday, April 27th, 2017, we heard from Windham's own client consultant, Jon Kazarian about best methods and practices for the portfolio construction and evaluation process.
The document provides an overview of how venture capital funds work, including:
1) Venture capital funds raise money from limited partners like pension funds and endowments and invest in companies.
2) Funds are organized as limited partnerships with general partners who manage the investments and seek high returns.
3) General partners are incentivized to find companies that can generate large returns in order to receive carried interest from highly profitable deals.
Gs503 VC industry players lecture 1 120115Stephen Ong
This document provides an overview of the venture capital industry and players. It defines what a venture capital firm is and explains their role in investing in private companies and actively monitoring portfolio companies. The document outlines the typical stages of venture capital funding and discusses key terms like limited partners, committed capital, and carried interest. It also examines trends in the global venture capital industry and remaining challenges for international venture capital markets.
The document summarizes Wells Fargo's small cap value equity investment strategy. It introduces the investment team and describes their philosophy of investing in undervalued small cap companies. It then outlines their three-step investment process of quantitative screening, fundamental research, and portfolio construction to select between 90-125 holdings while controlling risk. The team seeks to add value through bottom-up security selection and applying their process consistently over the long term.
This document discusses venture capital and angel financing. It defines venture capital as money provided by investors to start-ups and small businesses with long-term growth potential. Venture capital financing is high-risk but can have high rewards. Angel financing refers to early investments from individuals, usually friends or family of the entrepreneur. The document outlines the stages of venture capital funding, advantages and disadvantages, as well as how venture capital firms and angel investors operate.
The SF portfolio of funds provides investors with three funds of funds (SF Cautious, Positive, and Adventurous) that cater to different risk tolerances. The funds invest in a variety of underlying funds across asset classes and geographies to diversify risk. Performance has weathered market volatility since 2008 due to attention to downside risk, quality fund selection, and taking advantage of opportunities. The funds aim to outperform over the long-term by investing in undervalued assets rather than chasing short-term momentum. Research involves scrutinizing funds and understanding their strategies and economic backdrops. The funds are suitable for medium to long-term investors comfortable with some volatility.
Louis lagassé-The seven drivers of valueLouis Lagassé
A shareholder is any person, company or other institution that owns at least one share of a company’s stock. Because shareholders are a company's owners, they reap the benefits of the company's successes in the form of increased stock valuation. If the company does poorly, however, shareholders can lose money if the price of its stock declines.
The beginners guide to venture capital by jimmy stepanianJimmy Stepanian
As a technology company, I like the idea of bootstrapping. In fact, that is how we are building I Like Fashion Retail as a company. We are bootstrapping my business thus far
Asset Allocation in Taxable PortfoliosWindham Labs
On Tuesday, September 26th, we hosted Lucas Turton for a discussion on Asset Allocation in Taxable Portfolios. Lucas explored how to estimate the future value of a portfolio by considering assets on an after-tax basis, asset allocation and location for optimal tax efficiency, and best practices for tax loss harvesting and navigating the wash sale rule.
Venture capital (VC) is a form of private equity and a high-risk, high-return investment. VCs typically invest in startups that cannot raise traditional financing. They expect to lose their entire investment in 1/3 of companies, break even in 1/3, and generate returns from 1/3. VCs raise funds in cycles and have time-bound commitment and investment periods. They earn management fees and carried interest. Associates source deals and manage investments while partners make decisions. VCs prefer different stages and seek influence, liquidation preferences, and exist their investments through dilution or acquisition. There are also angel investors, accelerators, incubators, and corporate VCs that startups may encounter.
Different Startup Funding Stages : How Funding WorksmyHQ
The document outlines the different stages of startup funding: seed capital from friends and family; angel funding from wealthy individual investors; venture capital from firms in multiple rounds (Series A, B, C, etc.); mezzanine financing and bridge loans prior to an IPO; and finally an IPO where the company sells shares to the public. It explains that contrary to common misconceptions, startups can and do utilize various external sources of funding beyond the initial seed stage as the company grows and progresses through different valuation levels over time.
Have you ever looked at the news, or at a company’s results, and have had no idea what they mean or how to interpret it?
You know there’s information lurking deep down in the results that you could use to profit from, but you’re never sure where to look. Or exactly what to look at!?
And with reporting season around the corner, just imagine the profit opportunities you could uncover before any other investor if you knew how.
That’s why I want to give you the reporting strategy that you could use to read financial results like a pro.
Asset Allocation for Specific Client GoalsWindham Labs
On Wednesday, January 24th, we heard from Senior Client Consultant Jon Kazarian on how to tailor a portfolio to meet the specific investment goals of a client.
Pegasus Capital Inc is launching a $150M distressed debt fund focused on oil and gas companies. The fund will target returns of 12-20% with a target Sharpe ratio of 1.5. It will take a proprietary approach of conducting in-depth research on issuers impacted by low oil prices to identify underpriced securities. The fund aims to mitigate risk through hedging strategies and due diligence of counterparties.
Investment management is a key function for insurance companies to manage investments backing reserves and capital. Zurich Insurance Group commissions its investment management team to generate superior risk-adjusted returns relative to liabilities for shareholders and policyholders. Investment management creates value through a process that includes asset-liability management, strategic asset allocation, market strategy, asset manager selection, portfolio construction, and efficient asset management. The investment strategy aims to maximize economic objectives while minimizing unrewarded risks in order to create long-term value for stakeholders.
The document discusses various sources of finance for new businesses, including owner's funds, friends and family, bank loans, overdrafts, initial public offerings, retained profits, business angels, venture capitalists, government grants and loans, Islamic finance instruments, and how much capital is needed for non-current and current assets. It provides details on the advantages and disadvantages of different sources of finance like bank loans, overdrafts, leasing, hire purchase, and retained profits. It also discusses factors to consider when determining how much capital is required at different stages of a business.
Capital structure refers to the composition of long-term capital from sources like loans, reserves, shares, and bonds. It represents the relationship between different types of long-term capital. A proper capital structure maximizes firm value, minimizes costs, and increases share prices. It also allows firms to take advantage of new investment opportunities and supports country growth. Factors that affect capital structure include financial leverage, operating leverage, earnings per share, costs of different sources, growth and stability of sales, flexibility, nature and size of firm, cash flows, control, market conditions, asset structure, financing purpose, and period of finance. Advantages of debt include amplifying returns, greater control and flexibility, while equity provides flexibility in raising funds
1. Insurance companies hold significant investment assets to back insurance liabilities and capital reserves. Proper investment management of these assets is crucial as it impacts profitability and the ability to pay claims.
2. Insurers aim to balance risk and return in their investments. While higher returns require higher risk, insurers must ensure risks do not jeopardize their ability to meet liabilities.
3. Investment risk for insurers relates to potential mismatches between assets and liabilities due to market changes. Insurers practice asset-liability management to monitor and control this risk exposure.
The document provides an overview of core concepts in financial management, including:
1) The four major decisions in financial management are the investment, financing, dividend, and liquidity decisions.
2) The objective of financial management is to maximize shareholder wealth and firm value.
3) Financial management involves making continuous decisions about acquiring and committing funds to long-term assets and current assets.
Are you preparing for PE fund Accounting interview_.pdfrajendra168342
The document provides an overview of the basic operating model of private equity (PE) firms. It explains that PE firms manage money from limited partner (LP) investors like pension funds to invest in portfolio companies. The PE firm aims to generate value in these companies and eventually sell them at a profit, returning money and profits to LPs. It charges management fees and takes a cut of profits in the form of carried interest.
This document discusses capital structure planning and tax considerations related to capital structure. It notes that an optimal capital structure balances various factors to maximize shareholder return. Key tax considerations for capital structure include interest payments on debt being tax deductible while dividend payments are not, and how the proportion of debt and equity affects taxable income and returns. The document provides several recommendations for tax planning with different capital structures depending on factors like return on investment compared to interest rates.
Financial management involves planning, organizing, directing, and controlling the financial activities of a business. This includes procuring and using funds. [1] The objectives of financial management are to ensure adequate and regular funding, adequate returns for shareholders, optimal use of funds, safety of investments, and a sound capital structure. [2] Functions include investment decisions, financial decisions, dividend decisions, and ensuring liquidity. [3] The financial manager is responsible for raising funds, allocating funds, profit planning, understanding capital markets, and achieving the financial goals of profit maximization or shareholder wealth maximization.
This document provides a comparison of debt and equity financing. It discusses the key differences, including that debt represents funds owed that must be repaid with interest, while equity represents ownership in the company. It outlines advantages and disadvantages of both debt, such as tax benefits but also repayment requirements, and equity, such as no repayment but giving up some control. The document also summarizes several key areas of financial management like determining financial needs, sources of funds, financial analysis, capital budgeting, working capital management, and profit planning and control.
How to Become a Good Real Estate Investment Sponsor
Even the most attractive construction real estate investment can experience volatile performance. Preparing and dealing with systemic and non systemic investment risk presents enough concerns for investors.
factors considered when estimating the rate of returnAleck Makandwa
The major components that venture investors consider when estimating the required rate of return are:
1) The risk-free interest rate, which is the baseline rate without any risk.
2) The risk premium, which is additional return expected above the risk-free rate to compensate for investment risk.
3) Liquidity premium, maturity premium, inflation premium, and default premium, which compensate investors for additional specific risks like lack of liquidity, inflation, or default.
Common loan restrictions for new ventures include requirements to maintain accurate financial records, limits on total debt levels, restrictions on dividends or payments to owners, reporting/disclosure obligations, and restrictions on selling fixed assets. These protections help banks assess
The document discusses three methods for owners to transfer their company to key employees:
1. A long-term installment sale where the employees promise to pay the agreed value to the owner over 7-10 years through installment payments.
2. A leveraged management buyout where the transaction draws on management resources, outside equity, and significant debt financing. This structure can reward key employees and position the company for growth while minimizing the owner's ongoing risk.
3. A modified buyout that uses both an installment sale and outside financing to affect the buyout, reducing the owner's risk compared to a standard installment sale. Outside financing is obtained through private equity firms who partner with management to create shareholder value.
The document discusses types of mutual funds and provides information about mutual funds. It defines mutual funds as a mechanism for pooling resources from investors to invest in securities according to the fund's objectives. The key points are:
- Mutual funds allow investors to participate in a diversified portfolio with a relatively low minimum investment.
- Funds are professionally managed and investors share in proportion to their units in the fund's returns.
- Investors should carefully review the fund's prospectus or offer document to understand the fund's objectives, strategies, risks, fees and past performance before investing.
- The offer document provides important disclosures for investors to determine if the fund matches their goals and risk tolerance.
The document discusses the role and objectives of financial management. It defines the scope of financial management as securing capital and employing it efficiently to generate returns for owners. The modern financial manager plays an active role in investment, financing, and liquidity decisions compared to the traditional manager. Financial management is concerned with production and marketing functions whenever asset decisions are made. The basic financial decisions involve risk-return tradeoffs. Wealth maximization is a superior objective to profit maximization as it considers the long-term value and risk of the firm.
The passage discusses the role and objectives of financial management. It addresses:
1) The scope of financial management is to secure capital and employ it productively to generate returns and maximize shareholder wealth. The financial manager supports investment, financing, and profit distribution decisions.
2) Modern financial managers play a more active role beyond regular finance activities, such as supporting strategic decisions. Their role is more complex in large diversified firms.
3) Wealth maximization is a superior objective to profit maximization as it considers the time value of money, risk, and long-term shareholder value over short-term profits.
Venture capital provides risk capital to startups and growing companies in exchange for equity. It is invested through various financing rounds as companies progress from seed to growth stages. Venture capitalists obtain funds from institutional investors and aim to exit their investments through IPOs or acquisitions within 3 to 7 years to generate returns exceeding traditional investments. They conduct extensive due diligence on management teams and business plans before structuring investments using various equity and debt instruments.
The document discusses key financial decisions that a business must make, including investment decisions, financing decisions, and dividend decisions. It explains that investment decisions involve allocating capital to long-term assets and evaluating potential returns. Financing decisions require determining the appropriate mix of debt and equity funding. Dividend decisions relate to how much profit to distribute to shareholders versus retaining for reinvestment. The goal of all these financial decisions is to maximize the market value of the business for its shareholders.
Finance function is the most important function of a business. It is connected to all business activities like production and marketing. There are four major finance functions: (1) Investment decisions about long-term assets. (2) Finance decisions about capital structure and sources of funds. (3) Liquidity decisions about managing current assets and working capital. (4) Dividend decisions about how much profit to distribute to shareholders versus retain. The finance manager plays a vital role in all financial decision making.
The document discusses various topics related to financial management including:
1. Financial management involves judicious use of capital and careful selection of funding sources to help a business reach its goals.
2. The scope of financial management includes estimating funding needs, capital structure, funding sources, investment patterns, cash management, and controls.
3. Key financial decisions include investments, financing, dividends, and liquidity. The optimal decisions maximize shareholder wealth.
4. Capital budgeting evaluates long-term investments using techniques like net present value, internal rate of return, and profitability index.
The document discusses various topics related to financial management including:
1. Financial management involves judicious use of capital and careful selection of funding sources to help a business reach its goals.
2. The scope of financial management includes estimating funding needs, capital structure, funding sources, investment patterns, cash management, and controls.
3. Key financial decisions include investments, financing, dividends, and liquidity. The optimal decisions maximize shareholder wealth.
4. Capital budgeting evaluates long-term investments using techniques like net present value, internal rate of return, and profitability index.
Similar to E&Y on Hedge Fund Backed Reinsurers (20)
1. Leading the way
Hedge fund-backed reinsurers
generate AUM and permanent
capital for asset managers
2. How does this structure benefit the investor?
Returns
These reinsurance vehicles are virtually
certain to outperform funds managed by
the same asset manager using the identical
investment strategy. The reason for this is
the embedded leverage within a reinsurer.
The capital initially invested in the reinsurer
is invested in the asset management
strategy; however, the reinsurer also receives
premiums on its underwriting activities,
which in turn generates profits, and these
cash flows are also invested into the asset
manager’s investment strategy. Accordingly,
provided that the investment returns are
positive over the long term, the reinsurer is
virtually certain to outperform a fund with an
identical investment strategy.
Liquidity
The intent with these structures typically is
for the reinsurance entity to be taken public
within a reasonably short period of time,
which means that the investor will get daily
liquidity (investors can sell their shares in
the reinsurance entity any day the exchange
is open) versus the typical redemption
restrictions associated with investing in a
hedge fund. In addition, once the reinsurer
is public, the reinsurer typically trades at a
premium to NAV.
Tax benefits
There are also compelling tax attributes if
the reinsurer is structured properly. Unlike
an investment in a fund, where the investor
gets a K-1 each year and has to pay tax on
their allocation of the capital gains/dividends/
interest income, the investor would only
have to pay tax on their investment in the
reinsurance entity when their shares in that
entity are sold. In addition, upon the sale, the
tax would be at the capital gains rate rather
than at the rate based on the character from
the K-1 allocation. As such, there could be
both a tax deferral and an attribute change if
the reinsurer is structured properly.
How does this structure benefit the asset
manager?
Raising assets under
management (AUM)
This structure provides a new product
offering for the asset manager, and given
the compelling benefits from an investor’s
perspective, there is an increased ability to
raise additional AUM. These structures have
attracted pension funds and other investors
that would not otherwise have invested in the
asset manager’s hedge funds. Thus, these
structures provide a new source of AUM.
This in turn allows the asset manager
to generate increased performance and
management fees.
While investors converting from funds to the
reinsurer do not generate new AUM, the assets
they convert become permanent capital and
they increase the amount of investible assets
that the asset manager can manage, through
the sale of reinsurance premiums. For every $1
converted, the reinsurer may generate up to $2
of investible assets.
Permanent capital
The capital raised in the reinsurance entity
is permanent capital, removing the ever-
present threat for asset managers of
unforeseen redemptions. Every investor who
converts their direct investment in the asset
manager’s hedge fund into an investment
in the reinsurer converts a redeemable
investment into permanent capital from the
asset manager’s perspective. And once the
reinsurer is public, investors can sell their
investments in the reinsurer on a real-time
basis without any reduction in the capital of
the reinsurer. A win-win for both parties.
Free money to invest
The reinsurance entity will be levered
using “free money” (i.e., the reinsurance
premiums). Through the sale of reinsurance
contracts, the reinsurance premiums
collected by the reinsurer will be available to
be invested by the asset manager. Thus, in
1 | Leading the way
Hedge funds are increasingly
investing in the reinsurance
business as a means for
innovation and diversification
in the rapidly growing
convergence space. Hedge
funds have typically invested
in reinsurers through sidecars
or buying equity in the
companies. But more recently,
managers are launching
reinsurance businesses
themselves.
In this new structure, the
reinsurance entity focuses on
its chosen lines of business
from an underwriting
perspective, while the
investible assets are managed
by the sponsoring asset
manager. It’s been a success.
Over the past couple of years,
start-up reinsurers Third Point
Reinsurance Ltd., S.A.C. Re
Holdings, Ltd. and PaCRe,
Ltd. were all formed with an
underlying hedge fund sponsor
playing a pivotal role in the
formation. Third Point Re
recently went public with a
successful launch on the New
York Stock Exchange.
There continues to be a
tremendous amount of
interest in this business model,
and based on our market
intelligence, we expect to see
many more of these structures
set up soon.
3. addition to the initial capital that is managed,
the reinsurance company will generate
additional assets to be managed, generating
additional fees for the asset manager.
Typically, these types of reinsurance
structures have investable assets of 1.5–2
times their capital base.
Ability to monetize value
from asset manager
The reinsurance entity will typically trade
above the net book value once public,
which is compelling both to the investor and
asset manager. The founders of the asset
manager can use this structure to monetize
their significant personal investments in the
asset manager, by taking a portion of the
investment in the asset manager and investing
directly in the reinsurer, which will provide the
founder the investor benefits noted above in
addition to the monetization of the investment
once the reinsurer is taken public.
It is not easy to extract value out of an asset
management complex. Asset managers that
take themselves public sometimes trade at a
discount to NAV, which is largely due to the
many restrictions on holding publicly traded
securities associated with the Investment
Company Act of 1940. These restrictions
limit the opportunities and thus valuation of
the public investment manager. A reinsurer
is exempt from the Investment Company Act,
and thus, going public using a reinsurer is an
excellent way to monetize one’s investment in
an asset manager.
Investor relations
As an asset manager, there is a significant time
commitment in liaising with one’s investor base.
If the reinsurer becomes a public company,
individual communications with investors
will decrease dramatically because securities
laws require that information for investors be
provided to all investors.
Full steam ahead?
There are compelling reasons for both an
investor and an asset manager to want to get
involved in the formation of a hedge fund-
sponsored reinsurance company. Given these
compelling benefits, the obvious question is:
why isn’t every asset manager setting up these
structures?
In fact, many are. Those who are not point to
the following two concerns.
Distraction. To set up a reinsurer takes a
significant amount of time and management
attention. From the initial idea to the launch
of the reinsurer takes between 18 months
and 2 years. Someone needs to lead the
project who otherwise would be focused on
the core asset management operations. As
reinsurance is outside the skill set of most
asset managers, a significant amount of time
is needed to understand the reinsurance
industry and develop industry relationships.
A prudent approach to overcoming these
obstacles is to hire an experienced reinsurance
executive to advise the asset manager
throughout the process. However, it is
important to make sure the right advisor is
engaged, one who has experience in the start-
up phase of a reinsurer, without any conflicts.
Cost. The cost to launch a reinsurer is
substantial. As a result, typically only
asset managers with a certain scale would
consider setting up a reinsurer. There are
many variables that affect the cost, the
most important of which is the source of
capital. If the asset manager does not need
to raise funds for the reinsurer, but rather
the founder and executive management
along with existing investors in the funds
of the asset manager will provide the seed
capital for the reinsurer, the overall cost of
the project will decrease substantially. This
eliminates the need to provide incentives
to the lead investor, and the other costs
associated with raising capital.
The other significant cost is the retention of the
senior management team, most importantly,
the CEO. It is critical that a credible and
experienced CEO be retained to execute on the
objectives of the structure. The reinsurer will
require an A– rating from AM Best to allow for
the leverage model to work, and a key factor in
AM Best’s analysis of a start-up reinsurer is the
experience and credibility of the management
team. An experienced and credible CEO will not
sign on unless he or she receives guarantees
and significant stock-based compensation (i.e.,
guaranteed payments irrespective of whether
the reinsurer gets launched). The costs
associated with the CEO and management
team will be borne by the reinsurer and not
the asset manager should the reinsurer be
launched successfully. Accordingly, to minimize
the cost to the asset manager, it is imperative
that the probability of a successful launch be
very high prior to signing on a CEO.
The hurdles noted above, while significant,
certainly are not insurmountable with the
right advisors and careful management
to make sure that the expense load is not
incurred before certain hurdles are met. As a
decision to launch is made, it will be necessary
to determine the type of reinsurance to offer
to customers and the jurisdiction in which the
reinsurer will domicile.
2Hedge fund-backed reinsurers generate AUM and permanent capital for asset managers |