This document discusses common myths and beliefs in private equity, specifically regarding whether investing in successive funds of the same firms is safer and more rewarding than investing in emerging managers. The authors analyzed private equity performance data to test this myth. Their analysis found no evidence that persistence, or consistently strong performance, exists among private equity fund managers. Instead, the data showed that performance varied significantly across funds for the same managers. The authors conclude that investment selection is more important than sticking with established brands in private equity.
The document discusses social investing as an emerging trend that combines social impact and financial returns. It provides examples of social investing approaches, including hybrid value chains that partner businesses with social sectors, and socially responsible investing in companies with social conscience. While microfinance has faced scandals, the sector continues to attract talent and promises growth as regulations are introduced. The future may see investment products like mutual funds to allow retail investors to participate in social investing.
The decision to go public from an emerging market the ghanaian caseAlexander Decker
This document discusses research on the factors that influence a firm's decision to undertake an initial public offering (IPO) on the Ghana Stock Exchange. It first provides background on private sector financing challenges in Ghana and the role of the stock exchange. A literature review covers theoretical factors that could motivate an IPO, such as the need to raise capital, enhance firm value, and signal private information. The document then outlines some costs and benefits of going public. The research aims to identify which factors most influence IPO decisions for Ghanaian firms and how firm performance is impacted post-IPO. The methodology section indicates the study obtains data on both firms that conducted IPOs and non-IPO firms.
This quarterly newsletter provides an overview of recent market volatility and macroeconomic concerns. It notes that insider buying was high during recent market declines, which may indicate hidden value in some companies. The newsletter recommends focusing on high-yielding securities and considering insider information when investing. It also emphasizes the importance of keeping investments simple and understanding the risks and costs.
Bcg value creation in a low growth economy file59590managing1
The document discusses how developed economies are likely to experience an extended period of below-average economic growth due to factors such as the nature of the recent financial crisis, high consumer debt levels in countries like the US, and the winding down of government stimulus programs. This low-growth environment will have significant implications for how companies create shareholder value, with capital gains becoming less important and cash payouts to shareholders becoming more critical. Companies will need to find ways to thread the needle by combining increased cash returns with above-average but profitable growth in the challenging economic conditions.
The document discusses whether Brazil presents a good opportunity for private equity investments. It finds that Brazil has strong economic growth potential and a large pool of private companies in need of financing, but challenges include poor infrastructure, a lack of skilled professionals, and high costs of doing business and capital. While the Brazilian private equity industry is growing, the capital markets are still maturing compared to developed markets.
The Gavekal Knowledge Leader Indexes - Capturing the Excess Returns of Highly...Steven Vannelli, CFA
The document describes the process of creating the Gavekal Knowledge Leaders Indexes to capture companies that invest significantly in knowledge. It begins by outlining the construction of the underlying Gavekal Capital International (GKCI) Indexes, which serve as the selection universe. Key aspects include excluding certain security types and applying liquidity thresholds. It then compares the GKCI Indexes to the Morgan Stanley Capital International (MSCI) Indexes, noting some differences in methodology and constituent weights between the two sets of indexes. The document concludes by outlining the performance and risk profiles of the Gavekal Knowledge Leaders Indexes.
The document discusses the changing global economic landscape and the rise of companies from rapidly developing economies (RDEs). It introduces the 2013 list of 100 global challengers - fast-growing companies from RDEs that are driving global growth and transforming industries. Some key points:
- Revenues and employment of the global challengers have grown significantly faster than S&P 500 companies in recent years.
- They represent 17 countries, up from 10 in the original 2006 list, reflecting their increasing global expansion.
- Over 30 are consumer-focused, showing the growth of consumer markets and spending in RDEs and abroad.
- Twenty-six companies are new to the list, replacing those that have fallen
The document discusses the development needs of China's capital markets. It finds that China will need to overcome challenges to avoid the "middle income trap" and progress economically. This will likely require reorganizing the economy similarly to Deng Xiaoping's reforms in 1978. Currently, China's capital markets are dominated by banks and have room for improvement compared to developed markets. The stock and bond markets are described. For further development, China will need to allow more capital to flow to smaller businesses, develop new savings mechanisms, and open its capital markets further to absorb capital inflows and minimize economic risks.
The document discusses social investing as an emerging trend that combines social impact and financial returns. It provides examples of social investing approaches, including hybrid value chains that partner businesses with social sectors, and socially responsible investing in companies with social conscience. While microfinance has faced scandals, the sector continues to attract talent and promises growth as regulations are introduced. The future may see investment products like mutual funds to allow retail investors to participate in social investing.
The decision to go public from an emerging market the ghanaian caseAlexander Decker
This document discusses research on the factors that influence a firm's decision to undertake an initial public offering (IPO) on the Ghana Stock Exchange. It first provides background on private sector financing challenges in Ghana and the role of the stock exchange. A literature review covers theoretical factors that could motivate an IPO, such as the need to raise capital, enhance firm value, and signal private information. The document then outlines some costs and benefits of going public. The research aims to identify which factors most influence IPO decisions for Ghanaian firms and how firm performance is impacted post-IPO. The methodology section indicates the study obtains data on both firms that conducted IPOs and non-IPO firms.
This quarterly newsletter provides an overview of recent market volatility and macroeconomic concerns. It notes that insider buying was high during recent market declines, which may indicate hidden value in some companies. The newsletter recommends focusing on high-yielding securities and considering insider information when investing. It also emphasizes the importance of keeping investments simple and understanding the risks and costs.
Bcg value creation in a low growth economy file59590managing1
The document discusses how developed economies are likely to experience an extended period of below-average economic growth due to factors such as the nature of the recent financial crisis, high consumer debt levels in countries like the US, and the winding down of government stimulus programs. This low-growth environment will have significant implications for how companies create shareholder value, with capital gains becoming less important and cash payouts to shareholders becoming more critical. Companies will need to find ways to thread the needle by combining increased cash returns with above-average but profitable growth in the challenging economic conditions.
The document discusses whether Brazil presents a good opportunity for private equity investments. It finds that Brazil has strong economic growth potential and a large pool of private companies in need of financing, but challenges include poor infrastructure, a lack of skilled professionals, and high costs of doing business and capital. While the Brazilian private equity industry is growing, the capital markets are still maturing compared to developed markets.
The Gavekal Knowledge Leader Indexes - Capturing the Excess Returns of Highly...Steven Vannelli, CFA
The document describes the process of creating the Gavekal Knowledge Leaders Indexes to capture companies that invest significantly in knowledge. It begins by outlining the construction of the underlying Gavekal Capital International (GKCI) Indexes, which serve as the selection universe. Key aspects include excluding certain security types and applying liquidity thresholds. It then compares the GKCI Indexes to the Morgan Stanley Capital International (MSCI) Indexes, noting some differences in methodology and constituent weights between the two sets of indexes. The document concludes by outlining the performance and risk profiles of the Gavekal Knowledge Leaders Indexes.
The document discusses the changing global economic landscape and the rise of companies from rapidly developing economies (RDEs). It introduces the 2013 list of 100 global challengers - fast-growing companies from RDEs that are driving global growth and transforming industries. Some key points:
- Revenues and employment of the global challengers have grown significantly faster than S&P 500 companies in recent years.
- They represent 17 countries, up from 10 in the original 2006 list, reflecting their increasing global expansion.
- Over 30 are consumer-focused, showing the growth of consumer markets and spending in RDEs and abroad.
- Twenty-six companies are new to the list, replacing those that have fallen
The document discusses the development needs of China's capital markets. It finds that China will need to overcome challenges to avoid the "middle income trap" and progress economically. This will likely require reorganizing the economy similarly to Deng Xiaoping's reforms in 1978. Currently, China's capital markets are dominated by banks and have room for improvement compared to developed markets. The stock and bond markets are described. For further development, China will need to allow more capital to flow to smaller businesses, develop new savings mechanisms, and open its capital markets further to absorb capital inflows and minimize economic risks.
Right horizons PMS - India Asset Market Review 2013 & outlook 2014Vinayak Kanvinde
The document provides an outlook on Indian asset markets in 2014 from Right Horizons PMS. It summarizes the performance of asset markets in 2013, argues that signs point to India potentially being in the early stages of a bull market. It also discusses factors that provide safety nets for the Indian economy and lays out the foundation for the next bull market. Right Horizons believes the turning point for fixed income and equity markets in India will come in the next few quarters.
The Miasmic Asian Capital Jungle and the Tranquil Bamboo Innovator GroveKoon Boon KEE
This document summarizes a weekly column exploring investment opportunities in Asia by identifying resilient companies ("Bamboo Innovators") that can compound value over the long run. It profiles the Indonesian pharmaceutical company Kalbe Farma, which survived the 1997 Asian Financial Crisis. The column discusses Kalbe Farma's business model and transformation under its CEO Dr. Boenjamin Setiawan. While highlighting the limitations of only analyzing numbers, it aims to present companies as case studies to enhance understanding of sustainable business models. The document announces the upcoming launch of "The Moat Report Asia", a monthly report that will provide in-depth analysis of undervalued Asian companies with strong moats.
Assignment on Security Analysis & Portfolio ManagementAmit Kumar
This document discusses factors that affect stock market movements in India and challenges in managing client portfolios. For stock market movements, it identifies price rigging, regulatory actions by SEBI, RBI monetary policy, market sentiments, company announcements, global incidents, weather, and natural disasters as key factors. For managing client portfolios, it outlines challenges such as internal politics and culture, appropriate sponsorship, project management maturity, management commitment, adopting a common approach, prioritizing projects, pace of adoption, financial investment, human nature, and avoiding a "Big Brother" syndrome.
This document discusses high-growth companies and business support for them. It argues that public sector thinking has overly focused on "gazelles," or fast-growing startups, ignoring that growth is not always linear and varies by industry and business lifecycle stage. It also notes that some businesses may plateau at a certain size due to infrastructure limits. The document aims to critically re-examine models of high-growth businesses and identify sectors on Merseyside that could benefit most from accelerated support like that planned for Project EV, a business incubator. It argues Merseyside's economy relies on manufacturing and visitors and examines why some businesses face growth blockages.
Russia is now the sixth largest economy globally and offers significant opportunities for foreign investment and M&A across many sectors. Rising incomes and consumer spending are driving demand for branded goods, attracting global consumer companies to acquire well-positioned local brands. Germany has been particularly successful in Russia through long-term investments and commitments to training and logistics. Membership in the WTO will further diversify the economy and benefit sectors like automobiles, manufactured goods, and telecoms by reducing trade barriers and import duties.
China has experienced strong economic growth over the past 30 years but growth is expected to slow going forward. Two factors that help shelter China from external economic weakness are its ability to direct lending by banks and manipulate social policy to support growth, as well as the potential for domestic consumption to increase. Key areas for future Chinese growth include social housing, infrastructure spending, consumer spending, and consolidation in the retail sector. While China's stock market indices performed poorly in 2011, differences between Chinese and Western markets include Chinese companies focusing more on state policy goals rather than profits and more limited foreign ownership of Chinese shares.
Capital Markets Strategies for Sustained Competitive Advantage, in the Jamaic...Edward Wilson
NCB Capital Markets Limited is one of the major players in the investment banking sector in Jamaica. The current economic climate threatens the viability of this industry and only the most efficient and strategic will survive as the region in general and the nation in particular rides out this economic storm. There are however, numerous opportunities that are presented within the pangs of the crisis. The leadership of NCB . ought to be aware of this and position for full advantage.
Northwestern Mutual has achieved consistent success over decades through prudent investment strategies and conservative underwriting practices. It maintains high ratings and builds its book of business steadily without chasing short-term gains. Northwestern recruits and trains new representatives extensively, emphasizing client relationships and financial security planning over time. These strategies have allowed Northwestern Mutual to thrive while other insurers struggle.
This presentation evaluates the current state of the asset management industry and takes a look at where it might be expected to go from here. Topics covered include capital flows, the emergence of alternatives and the M&A environment
Capital Structure Determination, a Case Study of Sugar Sector of Pakistan Fa...inventionjournals
International Journal of Business and Management Invention (IJBMI) is an international journal intended for professionals and researchers in all fields of Business and Management. IJBMI publishes research articles and reviews within the whole field Business and Management, new teaching methods, assessment, validation and the impact of new technologies and it will continue to provide information on the latest trends and developments in this ever-expanding subject. The publications of papers are selected through double peer reviewed to ensure originality, relevance, and readability. The articles published in our journal can be accessed online
2012 China Confidential - Excel China Fundexcelfunds
This document provides an overview of the Excel China Fund managed by Barings. It discusses the fund's investment strategy, which focuses on undervalued Chinese companies positioned for growth. The portfolio managers believe inflation and policy risks in China will moderate and that government policy will emphasize pro-growth initiatives. The fund takes larger overweight positions in sectors like technology and consumer discretionary compared to its benchmark. It focuses on companies with favorable valuations, growth potential, and credible management teams.
This document discusses short selling versus naked short selling. It defines short selling as borrowing shares to sell with the expectation that the price will fall so they can be bought back at a lower price. Naked short selling is defined as illegal because it involves selling shares that are not actually owned. The document also examines the uptick rule versus mark-to-market accounting and which may be more effective during a financial crisis. It provides background on hedge funds and how some engaged in market manipulation through naked short selling, which some argue contributed to the troubles of firms like Bear Stearns and Lehman Brothers.
1) Despite an uncertain economic environment, many private equity firms are raising new funds dedicated to consumer deals in hopes of benefitting from market share gains.
2) However, investors have mixed views on dedicated consumer funds, with some preferring diversification across sectors while others welcome the specialization.
3) Private equity firms will use these new funds to acquire consumer brands, but valuations remain high for quality companies and the sector remains challenging with risks of failures or bankruptcies for certain deals.
The document discusses how increased mergers and acquisitions (M&A) activity could benefit mid-cap growth stocks. Large companies are holding significant cash reserves and searching for growth opportunities through acquisitions rather than organic growth. Mid-cap companies in sectors like technology, consumer discretionary, industrials and healthcare could become attractive targets for large-cap acquirers looking to supplement their growth. Historical data shows a strong correlation between M&A deal volume and returns on indices like the Russell Midcap Growth index, suggesting mid-cap growth stocks may prime beneficiaries of higher M&A activity.
Telling Our Story - Small and Medium EnterprisesMelvin Mathew
This document discusses IFC's work supporting small and medium enterprises (SMEs) globally at the request of the G20. It summarizes that:
1) IFC provides financing, advisory services, and policy support to help emerging markets develop their SME sectors.
2) In 2009 and 2010, the G20 tasked IFC with advising on scaling up SME access to financial services, sharing knowledge on successful models, and launching an SME Finance Challenge competition.
3) IFC is working to implement winning proposals from the Challenge to strengthen SMEs and support the new Global SME Finance Forum knowledge-sharing initiative.
US Small Business Administration Role during the Economic TurmoilHaji Gulahmadov
This document provides an overview of the U.S. Small Business Administration (SBA) and its role in helping the economy during times of economic turmoil. It discusses the current economic crisis, how small businesses helped the economy in past recessions through self-employment and new business creation. It outlines actions SBA took after 9/11 to provide disaster assistance loans to small businesses affected. The document argues that targeted lending through SBA is needed to help small businesses access capital and help the economy recover from the current recession.
The document discusses global economic volatility in the 4th quarter of 2011. It notes uncertainty from events like the Japan earthquake, Eurozone debt crisis, and US debt ceiling debate. Markets became extremely volatile since late July as risk aversion increased. The portfolio has reduced its allocation to JSE equities as prices fell despite strong company earnings. It remains defensively positioned in resources and retailers. The strategy is to reduce cash holdings and selectively buy equities at cheaper prices. The Foord International Trust aims to do this while avoiding long-dated bonds and focusing on multinational companies with emerging market exposure. One highlighted holding, LVMH, benefits from growing Chinese consumer spending.
GoPlanit was created to make group trip planning easier. It uses past travel experiences and personalized budgets to generate customized itineraries. Users can interact with friends and other travelers on the site to collaborate on trips and get recommendations. GoPlanit aims to cut down planning time. It generates revenue through advertising, partnerships, and recommending hotels and restaurants. The main challenge is maintaining user participation to keep the site and itineraries up to date.
Integrating Social Media augmented Richard Becker's class at the University of Las Vegas, Nevada in 2009. The class included this presentation in the morning and a live session in the afternoon. The deck is now retired.
El documento presenta información sobre diferentes figuras geométricas y sus fórmulas para calcular el área. También incluye una lista con diferentes sistemas de numeración como binario, maya, egipcio, romano y decimal.
Right horizons PMS - India Asset Market Review 2013 & outlook 2014Vinayak Kanvinde
The document provides an outlook on Indian asset markets in 2014 from Right Horizons PMS. It summarizes the performance of asset markets in 2013, argues that signs point to India potentially being in the early stages of a bull market. It also discusses factors that provide safety nets for the Indian economy and lays out the foundation for the next bull market. Right Horizons believes the turning point for fixed income and equity markets in India will come in the next few quarters.
The Miasmic Asian Capital Jungle and the Tranquil Bamboo Innovator GroveKoon Boon KEE
This document summarizes a weekly column exploring investment opportunities in Asia by identifying resilient companies ("Bamboo Innovators") that can compound value over the long run. It profiles the Indonesian pharmaceutical company Kalbe Farma, which survived the 1997 Asian Financial Crisis. The column discusses Kalbe Farma's business model and transformation under its CEO Dr. Boenjamin Setiawan. While highlighting the limitations of only analyzing numbers, it aims to present companies as case studies to enhance understanding of sustainable business models. The document announces the upcoming launch of "The Moat Report Asia", a monthly report that will provide in-depth analysis of undervalued Asian companies with strong moats.
Assignment on Security Analysis & Portfolio ManagementAmit Kumar
This document discusses factors that affect stock market movements in India and challenges in managing client portfolios. For stock market movements, it identifies price rigging, regulatory actions by SEBI, RBI monetary policy, market sentiments, company announcements, global incidents, weather, and natural disasters as key factors. For managing client portfolios, it outlines challenges such as internal politics and culture, appropriate sponsorship, project management maturity, management commitment, adopting a common approach, prioritizing projects, pace of adoption, financial investment, human nature, and avoiding a "Big Brother" syndrome.
This document discusses high-growth companies and business support for them. It argues that public sector thinking has overly focused on "gazelles," or fast-growing startups, ignoring that growth is not always linear and varies by industry and business lifecycle stage. It also notes that some businesses may plateau at a certain size due to infrastructure limits. The document aims to critically re-examine models of high-growth businesses and identify sectors on Merseyside that could benefit most from accelerated support like that planned for Project EV, a business incubator. It argues Merseyside's economy relies on manufacturing and visitors and examines why some businesses face growth blockages.
Russia is now the sixth largest economy globally and offers significant opportunities for foreign investment and M&A across many sectors. Rising incomes and consumer spending are driving demand for branded goods, attracting global consumer companies to acquire well-positioned local brands. Germany has been particularly successful in Russia through long-term investments and commitments to training and logistics. Membership in the WTO will further diversify the economy and benefit sectors like automobiles, manufactured goods, and telecoms by reducing trade barriers and import duties.
China has experienced strong economic growth over the past 30 years but growth is expected to slow going forward. Two factors that help shelter China from external economic weakness are its ability to direct lending by banks and manipulate social policy to support growth, as well as the potential for domestic consumption to increase. Key areas for future Chinese growth include social housing, infrastructure spending, consumer spending, and consolidation in the retail sector. While China's stock market indices performed poorly in 2011, differences between Chinese and Western markets include Chinese companies focusing more on state policy goals rather than profits and more limited foreign ownership of Chinese shares.
Capital Markets Strategies for Sustained Competitive Advantage, in the Jamaic...Edward Wilson
NCB Capital Markets Limited is one of the major players in the investment banking sector in Jamaica. The current economic climate threatens the viability of this industry and only the most efficient and strategic will survive as the region in general and the nation in particular rides out this economic storm. There are however, numerous opportunities that are presented within the pangs of the crisis. The leadership of NCB . ought to be aware of this and position for full advantage.
Northwestern Mutual has achieved consistent success over decades through prudent investment strategies and conservative underwriting practices. It maintains high ratings and builds its book of business steadily without chasing short-term gains. Northwestern recruits and trains new representatives extensively, emphasizing client relationships and financial security planning over time. These strategies have allowed Northwestern Mutual to thrive while other insurers struggle.
This presentation evaluates the current state of the asset management industry and takes a look at where it might be expected to go from here. Topics covered include capital flows, the emergence of alternatives and the M&A environment
Capital Structure Determination, a Case Study of Sugar Sector of Pakistan Fa...inventionjournals
International Journal of Business and Management Invention (IJBMI) is an international journal intended for professionals and researchers in all fields of Business and Management. IJBMI publishes research articles and reviews within the whole field Business and Management, new teaching methods, assessment, validation and the impact of new technologies and it will continue to provide information on the latest trends and developments in this ever-expanding subject. The publications of papers are selected through double peer reviewed to ensure originality, relevance, and readability. The articles published in our journal can be accessed online
2012 China Confidential - Excel China Fundexcelfunds
This document provides an overview of the Excel China Fund managed by Barings. It discusses the fund's investment strategy, which focuses on undervalued Chinese companies positioned for growth. The portfolio managers believe inflation and policy risks in China will moderate and that government policy will emphasize pro-growth initiatives. The fund takes larger overweight positions in sectors like technology and consumer discretionary compared to its benchmark. It focuses on companies with favorable valuations, growth potential, and credible management teams.
This document discusses short selling versus naked short selling. It defines short selling as borrowing shares to sell with the expectation that the price will fall so they can be bought back at a lower price. Naked short selling is defined as illegal because it involves selling shares that are not actually owned. The document also examines the uptick rule versus mark-to-market accounting and which may be more effective during a financial crisis. It provides background on hedge funds and how some engaged in market manipulation through naked short selling, which some argue contributed to the troubles of firms like Bear Stearns and Lehman Brothers.
1) Despite an uncertain economic environment, many private equity firms are raising new funds dedicated to consumer deals in hopes of benefitting from market share gains.
2) However, investors have mixed views on dedicated consumer funds, with some preferring diversification across sectors while others welcome the specialization.
3) Private equity firms will use these new funds to acquire consumer brands, but valuations remain high for quality companies and the sector remains challenging with risks of failures or bankruptcies for certain deals.
The document discusses how increased mergers and acquisitions (M&A) activity could benefit mid-cap growth stocks. Large companies are holding significant cash reserves and searching for growth opportunities through acquisitions rather than organic growth. Mid-cap companies in sectors like technology, consumer discretionary, industrials and healthcare could become attractive targets for large-cap acquirers looking to supplement their growth. Historical data shows a strong correlation between M&A deal volume and returns on indices like the Russell Midcap Growth index, suggesting mid-cap growth stocks may prime beneficiaries of higher M&A activity.
Telling Our Story - Small and Medium EnterprisesMelvin Mathew
This document discusses IFC's work supporting small and medium enterprises (SMEs) globally at the request of the G20. It summarizes that:
1) IFC provides financing, advisory services, and policy support to help emerging markets develop their SME sectors.
2) In 2009 and 2010, the G20 tasked IFC with advising on scaling up SME access to financial services, sharing knowledge on successful models, and launching an SME Finance Challenge competition.
3) IFC is working to implement winning proposals from the Challenge to strengthen SMEs and support the new Global SME Finance Forum knowledge-sharing initiative.
US Small Business Administration Role during the Economic TurmoilHaji Gulahmadov
This document provides an overview of the U.S. Small Business Administration (SBA) and its role in helping the economy during times of economic turmoil. It discusses the current economic crisis, how small businesses helped the economy in past recessions through self-employment and new business creation. It outlines actions SBA took after 9/11 to provide disaster assistance loans to small businesses affected. The document argues that targeted lending through SBA is needed to help small businesses access capital and help the economy recover from the current recession.
The document discusses global economic volatility in the 4th quarter of 2011. It notes uncertainty from events like the Japan earthquake, Eurozone debt crisis, and US debt ceiling debate. Markets became extremely volatile since late July as risk aversion increased. The portfolio has reduced its allocation to JSE equities as prices fell despite strong company earnings. It remains defensively positioned in resources and retailers. The strategy is to reduce cash holdings and selectively buy equities at cheaper prices. The Foord International Trust aims to do this while avoiding long-dated bonds and focusing on multinational companies with emerging market exposure. One highlighted holding, LVMH, benefits from growing Chinese consumer spending.
GoPlanit was created to make group trip planning easier. It uses past travel experiences and personalized budgets to generate customized itineraries. Users can interact with friends and other travelers on the site to collaborate on trips and get recommendations. GoPlanit aims to cut down planning time. It generates revenue through advertising, partnerships, and recommending hotels and restaurants. The main challenge is maintaining user participation to keep the site and itineraries up to date.
Integrating Social Media augmented Richard Becker's class at the University of Las Vegas, Nevada in 2009. The class included this presentation in the morning and a live session in the afternoon. The deck is now retired.
El documento presenta información sobre diferentes figuras geométricas y sus fórmulas para calcular el área. También incluye una lista con diferentes sistemas de numeración como binario, maya, egipcio, romano y decimal.
Learnings & buzz from Web 2.0 Expo San Francisco 2009Jussi Solja
This document contains quotes and lessons from the Web 2.0 Expo San Francisco 2009 conference. Some of the key points summarized are:
1. Successful companies use social media as a continuous activity rather than a campaign, and focus on ongoing relationships rather than one-off campaigns.
2. Content should include context about what, why, how, for whom etc. and companies should see social media as involving PR, marketing, product development and customer service.
3. Brands should spark conversations and enable interactions around "social objects" rather than aim to create word-of-mouth or disrupt expectations.
The global venture capital industry is experiencing paradigm shifts as it becomes more globalized. While the US remains dominant, Asia is growing rapidly, with China surpassing Europe in total investment amounts. Emerging markets like China and India prefer later investment stages, while more mature markets in the US and Europe invest earlier. Half of US venture capital firms now invest internationally, and globalization is expected to increase further in the coming years through cross-border investments and exits.
Aftermarket Support: How to Create a Liquid Public Stockkeatingcapital
Public companies can enjoy many benefits, particularly significantly higher
valuations and superior access to capital, compared to privately owned
businesses. These benefits are conditional on the existence of a “liquid” market
for the company’s shares. Illiquidity can prevent the stock of a smaller public
issuer from achieving the higher valuations enjoyed by its peers, thereby negating
one of the primary benefits of being public. The goal of any publicly traded
company, therefore, should be to have its stock become widely held, actively
traded, fully valued, and covered by at least one research analyst. But what
exactly do these things mean? This white paper creates a framework for
objectively defining and quantifying these terms and outlines a path to the holy
grail of liquidity.
Mridul arora final paper deloitte banking and financeMridul Arora
The document discusses various factors involved in pricing private equity transactions, including understanding the industry, valuation parameters, and estimating variables like EBITDA, enterprise value, and equity value. It also examines macro trends in private equity markets like growth in emerging markets and participation of investment banks and hedge funds. Pricing models focus on valuation metrics like EBITDA multiples, present value of future cash flows, and market ratios for listed companies.
Venture Capital Investment Q4 04 – MoneyTree Survey mensa25
Venture capital investing increased in 2004 to $20.9 billion after declining for three years, reversing the downward trend. Late stage investing jumped significantly to $7.2 billion while early stage investing remained strong. The life sciences sector continued to dominate with $5.6 billion invested, and software saw $5.1 billion in funding. First-time financings also increased, with 796 companies receiving funding for the first time.
Grant Thornton - Global Private Equity Report 2012 Grant Thornton
Najnowszy raport Grant Thornton pokazuje nowe kierunki rozwoju branży private equity w otoczeniu zdominowanym przez spowolnienie gospodarcze, ograniczone zaufanie do instytucji finansowych oraz nadchodzące zmiany regulacyjne (MSSF). Sektor ten pomimo stojących przed nim wyzwań, okazuje się siłą stymulującą wzrost.
SPACs: An Alternative Way to Access the Public Marketsrberger11
Companies are increasingly going public by merging with Special Purpose Acquisition Companies (SPACs), which are publicly traded pools of capital formed for the sole purpose of merging with an operating company.
DealMarket DIGEST Issue 170 // 30 January 2015CAR FOR YOU
The document provides a summary of recent news and events in the private equity industry:
1) The Korea Investment Corp plans to double its allocation to alternative assets like private equity from 8% to 20% of its portfolio, focusing on developed markets like the US and Europe. It also aims to expand its internal research team to make more direct investments.
2) A growing trend sees employee stock ownership plans (ESOPs) combining with private equity firms to facilitate management or employee buyouts of mid-sized companies.
3) A survey of top performing stocks over the past 15 years found they were from a diverse range of growing companies, not just tech, including a coffee company and kitchen equipment maker.
1. Political, market, and investor horizons remain out of sync as debt crisis tackling will be long and volatility continues.
2. Clients will take both cautious and opportunistic approaches to risk, blending flight and fight strategies.
3. Asset managers must develop capabilities to benefit clients from volatility through dynamic strategies, manager selection, and communication.
DealMarket digest issue 80_25 january 2013CAR FOR YOU
1. Global private equity investment grew for the third consecutive year in 2012, reaching its highest level since 2008. However, the total number of deals declined for the second year in a row.
2. European tech companies like Shazam, Rovio, Wonga, and Just-Eat are seen as potentially delivering the next billion-dollar exits from venture capital investments in Europe.
3. A survey found that M&A professionals expect deal activity in 2013 to remain stable or possibly improve slightly compared to 2012, with cash reserves and favorable credit seen as driving factors.
Sustainability issues are increasingly being factored into IPO planning and disclosures. More companies addressing sustainability risks and opportunities in SEC filings. Growing investor interest in environmental, social and governance issues leads companies to consider sustainability as part of overall business strategy and risk management.
The document summarizes an interview with J.P. Morgan and Rockefeller Foundation about their research report on impact investing. Some key findings of the interview are:
1) J.P. Morgan and Rockefeller Foundation published the research to support the growth of impact investing and help address social issues at scale by complementing traditional philanthropy and government efforts with private sector investment.
2) The research findings show that impact investing is emerging as a distinct asset class, with a potential market in studied sectors approaching $1 trillion. Early surveys also indicate many impact investments may achieve commercial or near-commercial returns.
3) Defining impact investing as an asset class will help organize investors around the field's unique skills and accelerate
This document provides an overview of venture capital and its application in Islamic finance. It discusses the venture capital lifecycle including fundraising, investing, and exiting investments. It describes how venture capital funds are typically structured as limited partnerships. When structuring deals, venture capitalists prefer to use preferred stock, convertible preferred stock, or participating convertible preferred stock over common stock alone. Other mechanisms used include vesting of shares and including covenants to protect investors. The document aims to describe how this model could be adapted to comply with Sharia principles.
Venture capital investing totaled $4.6 billion in 674 companies in Q1 2005, below the previous quarter but within the $4-6 billion range seen over the past two years. First-time funding increased to $1.2 billion while life sciences investing declined for the first time in two years. Later stage deals accounted for 40% of funding while early stage deals received 16% of funding, similar to previous quarters. The software industry received the most funding of any sector at $1.1 billion.
The document summarizes private markets fundraising trends in 2017. Some key points:
- Private markets fundraising reached a record $750 billion globally in 2017, driven primarily by a surge in US buyout megafunds (funds over $5 billion).
- US buyout megafunds raised $173.7 billion in 2017, a 93% increase from 2016. This surge accounted for most of the overall private markets fundraising growth.
- Investors continue to allocate heavily to private markets like private equity due to the potential for higher returns compared to public markets. Pension funds and sovereign wealth funds see private markets as a way to address underfunding issues and volatility.
DealMarket Digest Issue137 - 17 April 2014Urs Haeusler
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1. Selection Supersedes Access PAGE 1
Selection Supersedes Access:
1
When does experience pay in Private Equity?
Gitanjali Swamy, Bhavin Shah, Nitin Nohria, Daniel Bergstresser, Irina Zeltser
Introduction
Private equity is one of the fastest growing yet most opaque industries today.
From its inception in the early 50s to today, it’s been at the center of the some of
the most powerful entrepreneurial and wealth creation stories. Not only has the
industry created hundreds of millionaires in both investors and operators, but it
has also launched, nurtured and revived some of today’s most successful
Sections
businesses.
1 Introduction
According to PEI, Thompson and other sources, the PE equity market has been
growing rapidly and reached $2.5 Trillion in 2008. About 60% of the allocation or
2 Common Beliefs & Myths
$1.5 Trillion is allocated to venture and buyout funds and the remainder is
allocated to distressed, mezzanine and other funds. It is not just the sheer size of
3 Analysis, Contention & Results
this market that is compelling but the growth rate is extraordinary as well. In a little
4 Refuting Myths over a decade from 1980 and 1994, the amount of private equity outstanding
rose from less than $5 billion to $100 billion at CAGR of 23%. In the first quarter of
5 Conclusions 2008 alone, U.S. private equity firms raised $58.5 billion up nearly 32% over the
$44.3 billion in the first quarter of 2007.
Buyout funds alone now control over $900 Billion in capital not including leverage,
and venture capital funds control another $350 Billion. Including the impact of
leverage, they have an aggregate buying power of $3 Trillion; that’s enough to
buy more than 40 McDonalds, 10 GEs, and 500 General Motors. What were 296
VC and 40 buyout firms in 1985 has evolved to 741 VC firms and 588 Buyout firms
in 2007. Inspite of the industry growth, LPs are investing less and less in new firms.
From 2002 to 2006, while the total number of funds have grown by a CAGR of
7.85% and the AUM have grown by 43.9%, the number of new funds have only
grown by 1.34% and new fund AUM has only grown by 35%. Most of the new
growth comes from new buyout funds; in the venture industry the total venture
AUM has grown at a CAGR of 30.7% as compared to new venture AUM at half
that rate or 16.2%. In the same period, the number of new venture funds has
shrunk at -2.6% as compared to the total number of venture funds that has grown
at a CAGR of 3.58%.
Note on FOIA
The remaining private equity alternatives such as distressed and lending funds are
Both the US and UK government emerging categories that show the same pattern of fragmentation. This
freedom of information acts require fragmentation, coupled with the lack of transparency, makes it difficult for
disclosure by government agencies investors to assess and compare funds. It has created an environment where
on performance of PE vehicles. The rumors run rife and facts are rarely consistent. While many1 such as Calpers, have
US government FOIA, Title 5, 1966, tried and somewhat succeeded at making private equity fund performance
together with various state more transparent and objective, they have not focused on debunking some of
legislations from 1980 through 2006, the myths surrounding funding behavior and investor selection.
provided us the means to obtain the
source data. Our aim has been to review and challenge the key myths that have historically
guided and continue to guide investor selection behavior by analyzing the
industry-wide and investor-specific performance data that has only recently
become publicly available in the industry.
1 Footnote1: The past works includes experiments by Lerner et al that tried to establish the superior performance of endowments over pension funds
(Smart Institutions, Foolish Choices) or the exploration of persistence by Kaplan, Schoar. However, no work ever examined the causality or reality of
persistence over a long time frame.
This version of the “Selection Supersedes Access” paper was created for the students of Finc-190, Private Equity at Harvard University Extension School spring 2009. This
document contains unpublished research and information which is confidential and proprietary. By accepting a copy of this document, the recipient acknowledges the
confidential and proprietary nature of this information, agrees to hold this information in strict confidence, agrees not to use this information for any purpose without the prior
written consent of theAuthors, and agrees to return this document upon the written request of the Authors. This document may not be reproduced or distributed for any purpose
unless authorized in writing by the Authors.. Contact gms@zucicap.com or gmswamy@fas.harvard.edu with questions.
2. Selection Supersedes Access PAGE 2
One dominant myth that has become a crux of driving LP behavior is that
investing in successive funds of same firms or individuals is much safer, more
rewarding than investing in an emerging manager. This is the focus of our
research. According to Northern Trust Global Investments (NTGA) while 40% of
returns come from emerging managers, most LPs such as Calpers, NYCERS
allocate 1% or less to emerging manager programs. A vast majority of pension
funds, endowments, institutions, etc. make it a policy not even to look at or invest
in emerging manager funds. In fact, this situation has been getting progressively
worse; the NVCA reports that the percentage of new funds vs. follow-on funds
decreased from 33% in 2002 to less than 21% in 2007.We have been acting on
one of those urban myths that cannot be proven, but can easily be disproven.
The aim of our exercise is to either prove or disprove the myth of persistence and
to start an exploration of the real causes of better performance in private equity
firms.
Common Beliefs and Myths
In order to research and analyze this myth, we identified and challenged a
number of supporting beliefs that drive investor behavior. Investors have
traditionally believed that
1. Historical returns are a predictor of future performance and Persistence
of performance will continue.
2. Experienced fund managers will be more successful (what about
experienced investors or operators?) (i.e., better deal flow, edge in
deals, better financing, staff selection, etc.)
3. It is less risky to invest in tangential/new businesses founded by
experienced fund managers than to invest in emerging managers with
directly relevant skill sets
Note on Dataset This is based on several fallacious myths that the industry believes. Firstly, the
industry believes that experienced firms will deliver better returns, perhaps due to
Our dataset included all publicly their experience in the industry, history of working together and network of
disclosed pension and endowment data. relationships in the industry. The industry believes that experienced managers in
In particular, our dataset focused on 560 an irrelevant old category are still better bets in a new category than an
funds sponsored by 280 firms. 300 funds emerging manager with differentiable expertise in the same. E.g. a portfolio
had more than 1 successor and 132 manager would rather invest in a new India growth fund offered by an
funds had more than 3 successors. The experienced GP manager specializing in communications early-stage venture
start years ranged from 1978 to 2000. investing in Boston than a new fund composed of a team with individual team
The funds were distributed 36% venture, members have 20 years experience in Indian private equity. The industry believes
14% balanced, 29% buyouts. The funds that emerging manager’s teams will not have the source, operating and exit skill
were predominantly in the US with over set, network, experience to generate superior returns. Finally, LPs believe that
90% centered there but had 4% in investing in emerging managers does not present rewards commensurate with
Europe and 3% in Asia. The funds are the risk being taken.
distributed equally among all industries
with Biotech, Medical, Communications, Thus, the structure of the alternative investment management industry is geared
IT and Retail dominating. The mean (IRR) towards returning fund managers with a lot more obstacles, challenges and
of the data was 11.45%, median 8.45% straight-out refusals for emerging managers. In addition, the structure is inherited
and standard deviation 33%.We made biased towards a specialization model inherited from the public market investing,
almost no subjective assessments to which focuses only on financial specialization (small cap, mid cap, large cap)
segment, classify, manipulate data. The and not optimized for private equity, which is as much about active portfolio
product, industry, geography management with value add from industry, geography and financial expertise.
segmentation was collated from the LP This mentality or approach is true with respect to type of investment fund (i.e.,
sources where disclosed and completed venture, buyout, PE, etc.), industry specialization of fund (i.e., technology,
with data from the company’s own industrials, healthcare, etc.) and size of fund (i.e., early-stage, lower middle-
website. market, middle-market, large-cap, etc.)
This version of the “Selection Supersedes Access” paper was created for the students of Finc-190, Private Equity at Harvard University Extension School spring 2009. This
document contains unpublished research and information which is confidential and proprietary. By accepting a copy of this document, the recipient acknowledges the
confidential and proprietary nature of this information, agrees to hold this information in strict confidence, agrees not to use this information for any purpose without the prior
written consent of theAuthors, and agrees to return this document upon the written request of the Authors. This document may not be reproduced or distributed for any purpose
unless authorized in writing by the Authors.. Contact gms@zucicap.com or gmswamy@fas.harvard.edu with questions.
3. Selection Supersedes Access PAGE 3
Analysis & Contention
Note on Analysis The private equity industry has grown up believing in fallacy of persistence of
2
performance; good funds continue to do well and bad funds continue to badly.
A simple ordinary linear regression showed We have been acting on one of those urban myths that cannot be proven, but
an increasing positive correlation for values can easily be disproven. In fact, the traditional belief is actually completely
of N varying from 1 to 3, going from 0.52 to wrong. Our results show that contrary to common perception, Net IRR (net of fees
0.9. This clearly implied the persistence of and carry) actually shows a pattern of decreasing persistence beyond a small
returns for the first 3 funds. However, after window of 1-3 funds. From an LPs perspective Net IRR is a far more meaningful
fund 3, 4, the correlation changed direction metric since it reflects eventual returns to the LP and not the GP.
and became progressively smaller with N
going to 7. It started at 0.9 and decreased On an anecdotal basis, there are examples of both lack of persistence and
monotonically to 0.22. Eventually it turned persistence in performance. For example, A Partners (a top tier Hamilton lane
negative. rated firm) showed vintage 1998, 2000 returns of -17% and -26.8% respectively.
These were in no way predicted by their 1989, 1993, 1996 funds with IRRs of 14.7%,
A robust regression which down-weighted 77.8% and 189% respectively. On an average, Funds in the top 10% (decile) in
the outliers showed an even more startling performance showed a drop of more than 30% from Fund 1 to Fund 2 and Fund 3.
pattern that showed a monotonically The top decile showed a drop of more than 50% from Fund 4 to Fund 5 and
decreasing and almost immediately Fund6. Finally, among firms having 5 or more funds, 80% showed a decline of
negative correlation at N=2 onwards. The more than 50% from the 5th fund to the 7th fund. But while anecdotal evidence
correlation started at 0.009 and decreased may suggest patterns, the real proof comes from a comprehensive statistical
monotonically through N=7 to -0.39. analysis.
The standard quantile regression showed The objective of our exercise was to successfully prove or disprove what makes
exactly the same pattern with a minor better or worse private equity firms. The first step was to examine whether any
flattening of the curve at N=1, 2. The persistence existed; i.e. did good firms continue to do well and bad firms continue
correlation started at 0.2 and decreased to do badly. In order to see if past performance was in any way a determinant of
monotonically to -0.3 at N=7. It turned future, we conducted our experiments on nearly 600 closed funds from the public
negative at N=5. A winsorized regression disclosures of the top pension funds. In particular the classifications we compare
that eliminated the outliers all together and correlate the (net of fees) performance of N successive funds of a GP with
showed a similar pattern with a slower rate the net performance of the N+1th fund. N was varied from 1 to 10. If indeed
of increase through 1, 2 from 0.22 to 0.39 persistence held, the correlation coefficient would go up or stay constant but
and flattening of the correlation through would never go down. A negative correlation coefficient would indicate the
3,4, followed by a rapid monotonic decrease reverse of persistence.
going from 0.39 down to -0.1. To summarize, our experiments show that in fact the performance of N+1th fund
does NOT directly track2 the performance of the prior N (N=1,2,3,4,….10) funds. In
short, good funds do not continue to do well and bad funds do not continue to
Figure 1. Ordinary Linear Regression do badly. In fact, our comprehensive analysis shows that persistence is limited
Correlation Fund Performance vs. Prior Fund and at most restricted to a window of 3 funds. In general, there is decreasing
Performance. correlation between successive funds performances.
In conclusion, the industry belief in the persistence of returns is a fallacy. The
analytical selection of new good managers overwhelmingly trumps the
advantages of relationship access to existing managers in good private equity
fund management.
2
Footnote2: The correlation between the performance of N (N=1, 2, 3, 4….10) past funds and the next N+1th fund shows decreasing correlation as N is increased. In short, there
is limited persistence of performance. Contrarily, there is decreasing correlation and in some cases even an inverse (negative) correlation with increasing funds. A robust
regression which down-weighted the outliers showed an even more startling pattern that showed a monotonically decreasing and almost immediately negative correlation at
N=2 onwards. The correlation started at 0.009 and decreased monotonically through N=7 to -0.39. We used the Stata environment to perform multivariate regression analysis.
Our analysis adjusted for vintage variation in performance by creating an independent variable for each vintage year and using it as part of the regression analysis.
This version of the “Selection Supersedes Access” paper was created for the students of Finc-190, Private Equity at Harvard University Extension School spring 2009. This
document contains unpublished research and information which is confidential and proprietary. By accepting a copy of this document, the recipient acknowledges the
confidential and proprietary nature of this information, agrees to hold this information in strict confidence, agrees not to use this information for any purpose without the prior
written consent of theAuthors, and agrees to return this document upon the written request of the Authors. This document may not be reproduced or distributed for any purpose
unless authorized in writing by the Authors.. Contact gms@zucicap.com or gmswamy@fas.harvard.edu with questions.
4. Selection Supersedes Access PAGE 4
Refuting the Myths
Figure 2. Robust Regression Correlation
Fund Performance vs. Prior Fund
In fact, our experiments and analysis of underlying data show that none of the Performance.
common myths in private equity investing hold in reality.
Historical returns alone are NOT a predictor of future performance in private
equity firms and Persistence of performance will NOT continue. In fact, our
comprehensive analysis shows that persistence is limited and at most restricted
to a window of 3 funds. In general, there is decreasing correlation between
successive funds performances. A simple ordinary linear regression showed an
increasing positive correlation for values of N varying from 1 to 3, going from
0.52 to 0.9. This clearly implied the persistence of returns for the first 3 funds.
However, after fund 3, 4, the correlation changed direction and became
progressively smaller with N going to 7. It started at 0.9 and decreased
monotonically to 0.22. Eventually it turned negative. A robust regression which
down-weighted the outliers showed an even more startling pattern that
showed a monotonically decreasing and almost immediately negative
correlation at N=2 onwards. The correlation started at 0.009 and decreased
monotonically through N=7 to -0.39. This result clearly implied that in general
persistence does not apply except for a small window and if the outliers were
less pivotal, persistence did not hold at all.
Experienced fund managers will NOT always be more successful l. It is not just
the years of experience but the nature of experience. Moreover, experienced
fund managers tend to raise their fee/carry compensation. Thus, the net IRR or
returns to the investor actually does not show a superior return even when the
performance goes up. To illustrate this point, we looked at the top 10% (decile)
Note on Experiment
in our data set. We aggregated and averaged the performance data by fund
numbers. On an average, net IRR performance dropped 30% from Fund 2 to
We adjusted for the impact of vintage in
Fund 3 and over 50% from Fund 5 to Fund 6 or Fund 7.
all experiments by creating an extra set
of independent variables that reflected
It is NOT less risky to invest in tangential/new businesses founded by
the vintage. The correlation was run
experienced fund managers than to invest in emerging managers with directly
using these independent variables and in
relevant skill set. Once again our correlation results disprove this myth. As
effect adjusting for the impact of
explained earlier, our comprehensive analysis shows that persistence is limited
vintage. Some variables that we wish we
and at most restricted to a window of 3 funds. In general, there is decreasing
had access to but did not for this set of
correlation between successive funds performances. We compared the
experiment were, the Write-down,
correlation of ex
Organizational Turnover and Fee/Carry
terms. These variables would allow us to
see the impact of and adjust for changes
in the fund team, the pinpoint the cause
of return as an overall portfolio vs. single
company impact. For instance Google
was singlehandedly responsible for the
Figure 2. Data Extraction, Clean-up and Analysis Process returns of Kleiner vintage 1996 fund.
Fee/Carry terms would allow us to
determine whether the degradation in
persistence were due to a decrease in
the quality of the investment choices or
due to increase in compensation
demanded by a successful firm. We did
not adjust for management changes in
fund or subsequent significant fund size
changes by firm managements
This version of the “Selection Supersedes Access” paper was created for the students of Finc-190, Private Equity at Harvard University Extension School spring 2009. This
document contains unpublished research and information which is confidential and proprietary. By accepting a copy of this document, the recipient acknowledges the
confidential and proprietary nature of this information, agrees to hold this information in strict confidence, agrees not to use this information for any purpose without the prior
written consent of theAuthors, and agrees to return this document upon the written request of the Authors. This document may not be reproduced or distributed for any purpose
unless authorized in writing by the Authors.. Contact gms@zucicap.com or gmswamy@fas.harvard.edu with questions.
5. Selection Supersedes Access PAGE 5
3
Note on Results
Conclusions
Most of the results are statistically
In conclusion, we found that persistence of returns is a fallacious argument to
significant. But some data points should
justify LP investment choices in particular GPs. In reality, selection significantly
be ignored. In the OLP, The significance
supersedes access and therefore investors must spend more time in finding new
(P<|t|) varied from 4.3 exp-13 down to
GPs with the right strategic, operational and financial attributes, rather than
0.1 at N=5. Thus, N=6, 7 could be ignored
assume that proprietary access to past top-performers will guarantee future
in the OLP regression.
returns.
However, the robust and quantile
We believe that this result may be attributable to several factors.
regressions were more statistically
significant in the larger N’s. The
• Impact of successful firms increasing fees/carry. The increases in
significance (P<|t|) varied from 0.08 at
performance don’t translate to increases in the returns to the LP
N=3 and decreased down to 0.003 at
investors because successful funds increase their share (fees/carry) of
N=7. N=1, 2 were not statistically
the returns. This phenomenon has been observed in many industries
significant. The quantile regression
including the mutual fund industry. This mis-alignment of manager
showed a variegated pattern once again
incentives and investor incentives results in poor returns to the investor.
N=5 thru 7 were usually statistically
A good illustration of this came from the 2005 Mayfield XII, which
significant for most quantiles. At quantile
raised its fee to 2.5% and carry to 30% as compared to the industry
30, the significance was 0.01, implying at
standard of 2%/20, on the grounds that the1995 Mayfield IX, their most
1% error.
recent closed fund, returned a 49% IRR. The prior fund $1Bil, 2000
Mayfield XI, wasn’t closed and was only X% invested. LPs such as the
Kirsch foundation exited the fund with an IRR of -1.3%. Both Harvard
and MIT declined to participate because of extortionate fees but
Mayfield closed $325Mil irrespective through investors such as the
State of Alaska.
• Impact of industry and macro economic cycles/changes. Thus
expertise, relationships in any particular industry or product are not Figure 3. Percentage Num of First Funds vs.
perpetually valuable. A good firm must be willing to continually re- Follow on Funds.
invent itself and experienced fund managers with one specialization
do not guarantee future success either in the same industry or a
tangential one. Matrix Partners, one of the best east coast firms
returned a 213% and 516% IRR for 1995 Matrix IV and 1998 Matrix V
funds based on its investments and expertise in the communications
sector. In particular, the returns were very sensitive to the Cascade
and Sycamore investments both of which were communications
companies founded by a particular entrepreneur. By 2000, the
entrepreneur started funding his own companies and no longer
worked with Matrix the communications sector collapsed and 2000
Matrix VI returned a dismal -8%.
• Impact of GP staff turnover. The private equity organizations
themselves change and with a new set of partners/investing
professionals; the firm is not the same. It cannot be reasonably
expected that LPs will get the same returns. With the departure of
Luminaries such as Vinod Khosla, Kevin Compton, John Doerr was the
sole remaining star at Kleiner Perkins. None of the almost brand new
stable of partners/principles all of whom were luminaries but not
venture capitalists were able to provide returns. Since Doer’s 1999
Google IPO, the firm has yet to demonstrate a killer IPO. The partner
and investment staff turnover didn’t impact Kleiners ability to raise
funds, just its ability to deliver returns.
3 The same pattern was show by other statistical metrics such as mean+standard deviation, max etc. This data suggests that in fact, experienced
fund managers were NOT more successful.
This version of the “Selection Supersedes Access” paper was created for the students of Finc-190, Private Equity at Harvard University Extension School spring 2009. This
document contains unpublished research and information which is confidential and proprietary. By accepting a copy of this document, the recipient acknowledges the
confidential and proprietary nature of this information, agrees to hold this information in strict confidence, agrees not to use this information for any purpose without the prior
written consent of theAuthors, and agrees to return this document upon the written request of the Authors. This document may not be reproduced or distributed for any purpose
unless authorized in writing by the Authors.. Contact gms@zucicap.com or gmswamy@fas.harvard.edu with questions.
6. Selection Supersedes Access PAGE 6
Figure 4. First Time vs. Follow-on Venture
• Impact of capital oversupply. The increasing amount of capital, increasing fund Funds
size, and increasing number of funds are not balanced by a corresponding
increase in investment talent. Thus, firms can neither find high quality talent to
support increased fund deployment nor do they have the time to develop talent
in-house. In 2007, Blackstone raised $21.7 billion for the world's biggest private-
equity fund, just as a global credit crunch slowed leveraged buyouts. The fund was
triple the $6.45 billion pool that Blackstone raised five years ago. These funds were
raised over the year inspite of the catastrophic earnings, revenue and share price
collapse. Over the same year, Blackstone’s revenue fell 94 per cent from $1.23
billion to $68.5 million, earnings collapsed from more than $1Bil to a net loss of
$255Mil and the stock fell from its post IPO price of $35/share to $12/share.
• Impact of getting rich fat and happy when rewards independent of performance.
Principals in a successful firm lose their incentive to perform after reaping inordinate
rewards that are not tied to performance. There is significant incentive
misalignment between fund managers that reap heavy rewards from
management fees alone and investors whose returns are determined by
performance. Stephen Schwarzman, chairman and cofounder of the
aforementioned Blackstone Group, owns 39% of Blackstone, which operates
leveraged buyout and real estate funds, and funds of funds. Last year Blackstone
earned $2.3 billion on an average of $62 billion in assets. Schwarzman took home:
$940 million. The real kicker is that he only paid 15% federal income tax on that
income. That's the same tax bracket that a single worker is in if she earns between
$16,575 and $40,600 (assuming she claims the personal exemption and standard
deduction). A single worker earning between $40,600 and $85,850 is in a 25%
bracket. Net net, there is a limited motivation for an investment professional
rewarded in the aforementioned manner to perform.
The excessive focus on returning funds and lack of focus on emerging funds is neither
justified nor a “safe” strategy. It is not geared to generate the best returns for the corpus,
investors, clients, etc. The best investment strategy is to re-invest in the same firms at most
within a small window of opportunity of about 3 funds/terms or about 7 years. Instead an LP
must continually seed new funds in order to continue to reap returns over the long run.
We recommend a 30-50% allocation for emerging managers as opposed to the miniscule
percentage that LPs traditionally allocate. Coincidentally, that is strategy that “Smart Lps ”
like Yale Endowment etc. also apply in practice.
Sadly, the industry is doing just the opposite. From 2002 to 2006, the percentage of new firms
vs. old firm funds raised has dropped from almost 30% down to less than 22%. During that
time, while the total number of funds has grown by a CAGR of 7.85% and the AUM have
grown by 43.9%, the number of new firm funds have only grown by 1.34% and new fund
AUM has only grown by 35%. Most of the new growth comes from new buyout funds; in the
venture industry the total venture AUM has grown at a CAGR of 30.7% as compared to new
firm venture AUM at half that rate or 16.2%. In the same period, the number of new venture
firm funds has shrunk at -2.6% as compared to the total number of venture funds that has
grown at a CAGR of 3.58%.
In effect, the industry is creating an unstable situation that is progressively biasing the
investment selection towards poorer returns. It is a myth that investing in experienced
managers guarantees predictable or above average returns. However, having disproven
this myth does not mean we have completely identified what makes a better manager.
We are still conducting our experiment and future publications will include.
- Market trends/shifts
- Manager/partner departures
- Spinoffs vs. truly new starts
- Geography
- Larger fund sizes vs. same fund sizes
- Fee vs. carry trade-offs
Our next step is to expand the analysis to account for variations in industry, geography and
product focus. Following that, we would be able to do a detailed causal analysis that
deduces which factor – strategy, management, culture, diversity, vintage years, incentives
and needs (net worth), fund size, fee vs. carry trade-offs, motivations etc. actually determine
the performance. the “Selection Supersedes Access” paper was created for the students of Finc-190, Private Equity at Harvard University Extension
This version of School spring 2009. This
document contains unpublished research and information which is confidential and proprietary. By accepting a copy of this document, the recipient acknowledges the
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