Learning Curve

Educational pieces that describe and explain the key areas of private equity and venture capital

More articles

• Reflections on the financial crisis: when diversification failed 16 Aug 2009. Source: Fort Washington Investment Advisors. For professional investors and financial planners alike, the past year and a half has been one of the most challenging ever. Cumulative losses on stocks, bonds, real estate and other investment vehicles are estimated to be in the vicinity of $50tr globally, with roughly one third of that coming from the United States. Most portfolio managers were unable to avoid large losses, including some renowned value investors. Even sophisticated university endowments that contain large allocations to alternative investment vehicles reportedly suffered losses in the range of 25 per cent to 30 per cent.

• Responsible investment in private equity – a guide for limited partners 16 Jul 2009. Source: Principles for Responsible Investment. This guide describes some of the unique characteristics of private equity investments and provides suggestions on how the PRI Principles could be applied to the asset class. It aims to help LPs assess the extent to which a GP’s investment and ownership processes are consistent with the LP’s own commitments as a PRI signatory. Its scope addresses engagement and information that an LP can consider both before investing in a fund and during the life of that fund. The guide can be applied to any type of PE investment including: venture capital; mid-market; large buy-out; mezzanine; secondary investments; distressed and special situations; and funds of funds.

• Responsible investment in private equity – case studies 16 Jul 2009. Source: Principles for Responsible Investment. The PRI began its work on Private Equity in March 2008 by engaging with a broad range of key funds and investors in the sector. One of the obstacles we frequently faced when initiating these dialogues was some uncertainty about what Responsible Investment and the PRI could mean for private equity. This was the case for many general partners, funds of funds and limited partners.

• Private equity fundraising in 2009 and beyond 14 Jan 2009. Source: SJ Berwin. Simon Witney. Just seven months ago, when SJ Berwin published its annual review of terms and conditions for private equity funds, we reported that it was (more or less) 'business as usual'. As we were approaching the end of 2008, that felt like ancient history. With the financial crisis of October and November, the public market convulsions, a run on hedge funds precipitating a flight to safety, the onset of recession across many countries and the anticipated wave of corporate insolvencies during 2009, the European private equity industry is not alone in facing a very different environment - and some of the adjustments will clearly be painful, writes Simon Witney of SJ Berwin.

• Inside the dark box: shedding light on private equity 07 Jan 2009. Source: Work Foundation. Phil Thornton. The growth of private equity funds has become one of the most significant UK financial phenomena so far this century. Despite operating for almost three decades, it is only in the last couple of years that it has become a major issue for politicians, trade unions, regulators and the media. Jobs cuts at companies such as the AA and National Car Parks, bumper profits for the private equity companies and their investors and now the possibility that such well-known companies such as J Sainsbury and Alliance Boots might be taken private have pushed this technical issue to the top of many people's agendas, according to the Work Foundation's article which was originally published in March 2007 and which still offers readers a great insight into the industry.

• 2009 - four private equity heads give their views 17 Dec 2008. Source: AltAssets. Equity Dynamics has asked four top executives in the private equity world about their predictions for 2009. Read what Ross Marshall of Dunedin, Neil MacDougall of Silverfleet Capital, Bill Crossan of Close Growth Capital and Mark Wignall of Matrix Private Equity Partners predict for the year ahead.

• Buying assets out of bankruptcy in the US and the UK 17 Dec 2008. Source: Weil, Gotshal & Manges. Brandy L Treadway, Rebecca A Thomas, Sally Willcock. The current market environment presents opportunities for private equity buyers to purchase assets at discounted prices. While financially distressed sellers may be willing to quickly sell assets to stay afloat, the distressed nature of such sellers heightens deal uncertainty. Bankruptcy sales offer certain protections to both buyers and sellers in this situation, so private equity firms should evaluate the applicable bankruptcy laws when determining whether, how, and at what price to purchase these assets, according to Weil, Gotshal & Manges.

• Things I wish I'd known... 03 Dec 2008. Source: BVCA, NESTA. The testimonies you are about to read speak volumes about the level of entrepreneurial talent in this country. Here are 16 success stories that indicate we have the appetite and the skills from which to build world-class, innovative businesses in the UK, say the BVCA and NESTA.

• Entrepreneurs 26 Nov 2008. Source: The BVCA – The British Private Equity and Venture Capital Association. Entrepreneurs are the lifeblood of business. Whether creating new companies or rejuvenating established businesses, they provide the crucial driving force that creates growth and success, says the British Private Equity and Venture Capital Association.

• Private Equity Comment: values, commitments and transparency in France 21 Nov 2008. Source: SJ Berwin. SJ Berwin. Despite suffering from the trauma in the markets this year, the European private equity industry has also continued to make progress on initiatives to make it more open and transparent to the public at large. In France, for example, over 150 French private equity firms signed up to the charter issued in June by the French national venture capital and private equity association, the AFIC. The Charter is an important document: it sets out the "values that private equity investors wish to promote, the responsibilities they assume and the commitments to which they subscribe". Like many other European private equity associations, and following the lead of the British Private Equity and Venture Capital Association (BVCA) in November last year, the French have set an important framework for the behaviour of their members, recognising the increasing importance of private equity to the wider economy, and the wider public interest in its activities.

• How to go public and why? 19 Nov 2008. Source: How To Go Public Inc. (HTGO). Jay Smith. Have you attempted to raise money for your company privately? Fact: it is easier to attract private placement investment capital if your company's common stock is already publicly traded, argues Jay Smith of How To Go Public Inc. A ticker symbol provides liquidity for shareholders and is a great corporate tool to attract private placement capital. This tool provides assurances to the restricted capital investors that there is a 'light at the end of the tunnel' and they will be able to realise an eventual return on investment.

• Inside the Growing Secondary Market for Venture Capital Assets 12 Nov 2008. Source: Millennium Technology Value Partners. Dan Burstein and Sam Schwerin. For the last decade, secondary market activity involving all types of private equity investments has been a booming and increasingly efficient aspect of the far larger overall private equity market. Total secondary private equity transactions have grown 14-fold over the last ten years, from approximately $600m in 1998 to well over $8bn in 2007. Indeed, secondary private equity investing grew at an even faster rate than the unprecedented and explosive growth of total private equity assets under management during the same time period. This article originally appeared in Preferred Returns, the newsletter of the American Bar Association's Section of Business Law Committee on Private Equity and Venture Capital.

• KPMG Hedge Fund Cost Survey 06 Nov 2008. Source: KPMG. The Hedge Fund industry is going through a period of significant change, with three main factors helping to shape the future:

• Credit Crunch Q&A 31 Oct 2008. Source: Greycourt. Gregory Curtis, Mark Laskow, Gregory R. Friedman, Jim Foster and Chris Fineburg. What started last summer as a traditional credit crunch has mutated into something much worse: collapsing home prices; a global stock market rout (the Chinese market is down some 50 per cent as we write); recessionary economic conditions; accelerating inflation, especially in the emerging economies (almost 9 per cent in China); a plunging US dollar; a meltdown in corporate profits; a bubble in commodity prices; danger in completely unexpected places (cash and commercial paper, for example); and the collapse of important institutions, including hundreds of mortgage brokers and lenders, to say nothing of Bear Stearns. In talking with investors, we find that they are more concerned than at any time since 1974. In the following Q&A we explore what a credit crunch is, why it happened, how it morphed into the mess we find ourselves in today, and what investors ought to be doing about it in their portfolios.

• Private equity and hedge funds 29 Oct 2008. Source: SJ Berwin. Ajay Pathak. Some politicians have fallen into the trap of bundling private equity and hedge funds together. That is a mistake: private equity is long term and long only, and that makes it fundamentally different, says Ajay Pathak of SJ Berwin. That is not to say that the two types of investment strategy cannot learn from each other, and they have done that in recent years.

• Video: VentuReality 24 Sep 2008. Source: NVCA. This is the first part of the US National Venture Capital Association's 'VentuReality', a three-part web video series that follows the humorous plight of a fictional entrepreneur in search of financing. The NVCA is celebrating its 35th anniversary this year.

• China’s private equity landscape 17 Sep 2008. Source: Weil, Gotshal & Manges. Peter Feist, Anthony Wang, Sidney Qin. Private equity investments in China continue to attract significant attention across the private equity spectrum from global buy-out funds, venture capital funds, regional funds and other investors. Unlike more developed markets where control transactions are often the focus for many investors, private equity investing in China generally takes the form of minority growth capital or pre-IPO investments in businesses where the Chinese founders or management have controlling or significant stakes, according to this article from Weil, Gotshal & Manges.

• Key structuring issues in industry roll-ups 10 Sep 2008. Source: Deacons. Nick Humphrey. There have been a number of high profile industry consolidations, or roll-ups, in recent times which have created significant shareholder value such as Fone zone, ABC Learning Centres and Medical Imaging Australia. However as powerful as the strategy is, it is not suited to all industries and there are significant execution and integration risks, writes Nicholas Humphrey of law firm Deacons.

• Private equity investing: a primer for the serious “smaller” investor 03 Sep 2008. Source: Greycourt. David Lovejoy. Once an investor decides to allocate capital to private equity, the first question is, ‘How should I go about it?’ Properly structured, private equity can be the most rewarding sector of an investment portfolio. Unfortunately, most investors in private equity do not earn returns anywhere near what they need to compensate for the risks they have taken. This paper by David Lovejoy of Greycourt looks to summarise the private equity opportunity, identify the key risks and outline a strategy for investing in private equity sensibly and profitably.

• Evaluating new and niche markets quickly 03 Sep 2008. Source: Droege & Comp. Jonathan Hardt, Dr Bjoern Roeper. Opportunistic investors in the mid market are regularly presented with potential investments in markets that are not well known. Some of these niches may prove to be overlooked gems, while others have been overlooked for a reason. The difference between the right investment and the wrong one can come down to your ability to rapidly evaluate these niche markets, according to Jonathan Hardt and Dr Bjoern Roeper of Droege & Comp.

• Demystifying the credit crunch: a primer and glossary 06 Aug 2008. Source: Arthur D. Little, The Private Equity Council. Jonathan Cheng, Matthew Walsh and Simon Flax of Arthur D. Little’s New York office. The term 'credit crunch' has entered the popular lexicon. Barely a day passes when the media is not opining on the topic. Rarely does an economic event have such a profound ripple effect on institutions and individuals throughout the world. Understandably, policy makers are working to respond to the credit crunch and its aftershocks, according to this article by the Private Equity Council and Arthur D. Little.

• Perspectives - Capital Dynamics quarterly newsletter July 2008 30 Jul 2008. Source: Capital Dynamics. Within the bulletin, the international private equity asset manager offers its views on why it is worth taking a closer look at the European venture capital industry. An easy-to-use graphical illustration of the market climate for the different regions and sectors can be found on page 3/4, followed by key market figures.

• The End Game? An analysis of the bulk buy-out market and other de-risking solutions 23 Jul 2008. Source: Punter Southall Transaction Services. Richard Jones FIA, Martin Hunter, Oliver Herbert. With a large number of players entering the UK pension bulk buy-out market in recent times, there has been considerable press speculation surrounding this market, with some commentators expecting to see rapid growth in this area. This report, by Richard Jones FIA, Martin Hunter and Oliver Herbert of Punter Southall Transaction Services, seeks to set out the current state of the annuity business, including the details of the environment in which it operates, the risks faced by insurers and a discussion of current pricing levels. It also discusses each of the current players in the market and describes the annuity purchase process, as well as looking at the buy-out decision from the perspective of the sponsoring employer. It then considers alternatives to buy-outs offered by the market, as well as other de-risking solutions available to pension schemes and their sponsoring employers.