Transcript Dia 1
Masterclass PE Fundraising
Prof. Luc Nijs
Founder & Chairman Horizon Ltd
Geneva July 2, 2009
ICBI Super Return Emerging markets Conference
How today will look like (more or less)
9.30-11.00
11.15-12.30
Data review
Structural considerations and
applications
Terms & conditions (I)
13.30-14.15
14.30-16.00
16.00-16.30
Terms & conditions (II)
EM PE as an asset class
Wrap-up, Q&A and discussion
Where to start?
Why not fundraising !
Despite the market conditions EM PE raised $ 66,5 bio in 2008, a 12% rise
Proportional share in total global PE fundraising raising for 5 years in a row now
Relative decoupling & economic power shifting is reinforced by current
recession
Cyclical recession became a structural one and the risk of L-shape depression is
looming (cf. Ponzi economy)
Source: EMPEA April 2009
Fundraising per region
Market outlook for fundraising
Market Outlook
A few conflicting data:
Preqin (April 2009):
US leads the way with 23 bio $
Europe 20,2 bio $
EM 2,7 bio$
Lot of funds postpone final closing
Development finance will focus more on direct
investing (FOM,…)
Force of consolidation coming in
25-50% of GPs are struggling for survival
Market outlook for EM fundraising
The LP View
Survey April 2009
Would you consider committing to Emerging
Market funds?
Yes
94%
No
6%
Would you invest with a Global Emerging Market
Fund?
Yes
50%
No
50%
Would you consider Local Emerging Market
Funds?
Yes
95%
No
5%
Which Region would you invest in?
Africa 9%
Asia Pacific
Latin America
Middle East
7%
Russia 9%
30%
45%
Which emerging country would you
invest in?
Australia5%
Brazil
China 8%
India
MENA 8%
Russia
South Africa
5%
43%
18%
13%
Investors stay committed…but…
Some of the underlying fundamentals
What about the converts…
Market Outlook
Argumentation for refusal of EM proposition:
(Short-term) EM risk
Lack of experience in EMs
Only few quality GPs available in EMs
Quantitative easing and systemic risk?
Some of the underlying fundamentals
A (new) inconvenient truth about risk
Emerging Markets Risks
Political instability
Market fundamentals
Counterparty
Emerging Markets
Curreny (F/X)
Pre-crisis Thinking
High Risk
High Growth
High Risk
High Growth
Low Risk
Low Growth
High Risk
Low Growth
Post-crisis Thinking
Market fundamentals
Developed Markets
Legal / Regulatory
Developed Markets Risks
Structural issues
Environmental
Legal / Regulatory
Av. risk premiums in EMs (%, 2008-2009)
Another inconvenience
Capital inflows to developing world
(Source: IFF, 27 January 2009)
Historic & projected EV/EBITDA
Source: Prop. Research, averages for the clusters
Something else that is inconvenient
Past performance & GP selection
Institutional investor views: EM versus
developed (December 2008)
Institutional investor views: EM versus
developed (April 2009)
Portfolio allocation
PE penetration as an asset class
Source: Goldman Sachs, EMPEA
Portfolio exposure
Reasons for expansion or continuation
Source: EMPEA 2008
EM Private Equity performance
Source: Cambridge Associates LLC & prop. research,: pooled end-to-end returns, net of fees, expenses and carried interest
Comparative end-to-end results 6/30/2008
(*) Statistical noise likely due to low sample distribution
Source: Cambridge Associates LLC & prop. research,: pooled end-to-end returns, net of fees, expenses and carried interest
Impact on portfolio construction
In 2008 about 1/3 of the total pool of LPs had some kind of exposure to EMs
Portfolio weighting somewhere between 10-30%
Do or die for LPs the next couple of years
Systemic risk in Western markets are not reflected in risk premiums
Source: Proprietary data
Smoke & mirrors…
BVCA and E&Y 2008 performance study
A disaster waiting to happen
So now what…
If PE is an activist shareholders’ position than why
have these funds been managed as investment
vehicles
Demonstrate inept to manage companies
Focus on financial engineering
Models have to change
Fund structure
Terms & conditions
Exit modeling
Valuation and transparency
So now what…life after leverage
Value creation/operational side
Impact of average /holding periods
Massive room for improvement
of private capital formation
Put capital to work
But do they have
the right ‘human capital in place’?
Is this time going to be different for EMs?
During previous booms and busts the developed
and developing world evolved in a parallel fashion
This time there is a (partly) contra-cyclical pattern
Political & regulatory impact
Global versus local teams: the best of both
Business model rethinking & paradigm shift
EM debt usage less or more prudent
Is there something we can learn
from the past?
Natural questions
Is this a crises like every other or a profound shift?
How will the industry evolve in the next decade?
What are the implications for the asset class?
What is the position of EM propositions within this
space?
What is the impact on portfolio management and
allocation
Can we learn something that might affect the
fundraising effort?
This talk
Will seek to answer these questions by looking
backwards
Traditionally, very hard to understand key drivers
of private equity success
In recent years, much more information
Drawing on large-sample and case evidence
Thoughts about future of private equity more
generally…
And particularly in new private equity markets
Everyone does about the same
Frequent claim among investors:
Emphasis on balancing portfolio by:
Type of fund
Location of fund
Vintage year
Similar to what’s seen in public market investing
Recent work
Has sought to understand how much difference
is…
Between fund classes
Between funds
Seeking to distinguish importance of individual
performance
Evidence from the Yale endowment
Bond Funds
Difference Between
Top and Bottom
Quartile
Equity
Funds
Private
Equity
0%
Source: Lerner [2003]
5%
10%
15%
More general patterns
20%
15%
10%
5%
0%
All Private Equity
Source: Kaplan and Schoar [2005]
Venture Capital
Buyouts
The reality
The key difference is between different funds:
Unlike public markets
Investing in the right categories is not nearly as
critical as getting into the right companies!
“Regression to the mean”
Frequently heard stories…
“Our last two funds were a disappointment, but
we’re getting back on track…”
“I considered investing in the fund, but I decided
that their success must be a fluke...”
Recent work
Has sought to understand nature of performance:
Is there little continuity from quarter-to-quarter?
Many studies of public markets suggest little
persistence:
Mutual funds
Hedge funds
Or is the reality different?
Persistence of performance
Bottom
Medium
Bottom Tercile
61%
22%
17%
Medium Tercile
25%
45%
30%
Top Tercile
27%
24%
48%
Source: Kaplan and Schoar [2005]
Top
• High likelihood that the
next funds of a given
partnership stays in the
same performance
bracket
Persistence
• 1% boost in past
performance → 0.77%
boost in next fund’s
performance
The reality
Performance seems to be very “sticky”:
Good continue to do well
Underperformers continue to do so
While exceptions, seems to be the basic rule:
Seen in buyouts as well as venture
Growth doesn’t hurt
Numerous venture groups have grown
dramatically.
Mid 1980s and late 1990s.
Recent dramatic growth by buyout funds
Have typically argued that can sustain performance
despite growth
But powerful incentives to grow may induce skepticism
Market is now clearly turning away from the at this stage
Fund sequence number
• Positive relationship
between IRR and fund
sequence number
• First time funds perform
especially poorly
• Regression results control
for vintage year effect,
fund category and fund size
IRR and Fund Sequence Number
25
20
IRR
15
10
5
0
1
2
3
4
5
6
7
Sequence Number
Source: Lerner and Schoar [2005]
8
9
10
11
Fund size
Concave relationship
between IRR and fund size
Fund size is measured as
capital committed at
closing
Regression results control
for vintage year, fund
category
Relation IRR and Fund Size
14
12
10
IRR
8
6
4
2
0
1
2
3
4
5
6
7
Fund size in $100 m illion
Source: Lerner and Schoar [2005]
8
9
10
11
Change in fund size
• Negative relationship
between change in IRR and
change in fund size for a
given firm
• Fund size is measured as
capital committed at
closing
• Regression results control
for vintage year effect,
fund category, and firm
fixed effects
Source: Lerner and Schoar [2005]
Partner to size ratio
IRR and Partner to Size Ratio
• Positive relationship
between IRR and the ratio
of partners to committed
capital
• Regression results control
for vintage year effect,
fund category, and fund
size
30
25
IRR
20
15
10
5
0
0
0.2
0.4
Number of Partners to $100 million in committed capital
Source: Lerner and Schoar [2005]
0.6
Partner to total staff ratio
IRR and Partner to total staff ratio
16
14
12
IRR
10
8
6
4
2
0
0.1
0.3
0.5
Number of partners to total staff
Source: Lerner and Schoar [2005]
0.7
• Positive relationship
between IRR and the ratio
of partners to total staff
• Total staff includes
associates, principals etc,
excludes purely admin.
positions
• Regression results control
for vintage year effect,
fund category, and fund
size
Difference in deal success rate
Specialist firms are
more likely to have
successful deals
3%
I.e., 30% vs. 32.1% vs.
33.1%.
2%
Partners’ focus
especially matters
1%
0%
Specialized Generalist Generalist
Firm with
Firm with
Firm with
Specialized Specialized Generalist
People
People
People
Source: Gompers, Kovner, Lerner and Scharfstein [2005]
Returns: Disparity between recent past
and historical pattern
25%
20%
Small Funds
Medium Funds
Large Funds
Mega Funds
15%
10%
5%
0%
10/86-9/06
10/03-9/06
Source: Venture Economics
Returns: One past episode
50%
40%
Small Funds
Medium Funds
Large Funds
Mega Funds
30%
20%
10%
0%
12/86-12/89
Source: Venture Economics
One past episode (continued)
50%
40%
Small Funds
Medium Funds
Large Funds
Mega Funds
30%
20%
10%
0%
12/86-12/89
12/89-12/92
Source: Venture Economics
The reality
Funds with higher sequence number, i.e., established funds,
perform better
Larger funds have better performance—to a point
Rapid growth in capital under management is associated
with performance deterioration
May be driven by less impact of partners:
Funds with more partners per dollar managed have higher returns
Funds with higher partner-to-non-partner ratio have higher returns
Decline in specialization leads to poorer performance
Anyone can play
Lately, great deal of interest from new investors:
Public pension funds
Non-U.S. governmental entities
Attracted by high returns that established
investors have enjoyed
Recent research
Has sought to understand the differences between
investors
Does everyone do the same?
Or are there substantial differences?
Key data:
LP investment decisions
Fund returns
GP and LP characteristics
Performance summary
Substantial performance differences:
~13% differential in annual returns between
endowments and next best
Entirely driven by early- and late-stage VC
Advisors and banks particularly poor
Patterns true when weighted as well
Performance by investor type
Banks
Advisors
Public Pensions
Insurance Companies
Private Pensions
Endowments
-5%
Source: Lerner, Schoar and Wang [2005]
0%
5%
10%
15%
20%
Concerns with univariate tests
Do these reflect other differences:
E.g., endowments early investors and more
heavily weight VC
Examine through regressions:
Regress IRR on fund and LP characteristics
Only include <1999 funds to insure meaningful
performance numbers
Regression analyses
Differences persist:
Endowments outperform; corporate pensions
and banks underperform
Proximity negatively associated with
performance
Younger LPs do worse:
At least among advisors, banks, corporate pensions,
and insurers
Regression analyses (cont’d)
Market inflows:
Negative in general
Especially for advisors, corporate pensions, and
insurers.
Hot markets appear to lead to more herding by these
investors
Question: Does a bear market have the same effect?
Reinvestment decisions
Reinvestment decision should be made with better
information and without access constraints
Look at follow-on funds in our sample:
Only look at same classes of funds
Statistics on reinvestment
Reinvestment rates differ:
Public pensions, insurers higher
Higher in VC than buyouts
More likely to reinvest when high IRR
Next fund has higher IRR when reinvest
Reinvestment (continued)
Pension funds and advisors tend to invest when
current returns are high
But much more dramatic difference in future
returns from endowments
Also smaller funds
Substantial differences in ability to identify or act
on inside information
Reinvestment and current returns
40
30
20
Reinvested
Did Not Invest
10
0
Advisors
Banks
Corporate Endowments Public
Pensions
Pensions
Source: Lerner, Schoar and Wang [2005]
Reinvestment and future returns
40
30
20
Reinvested
Did Not Invest
10
0
-10
Advisors
Banks
Corporate Endowments Public
Pensions
Pensions
Source: Lerner, Schoar and Wang [2005]
Is access an explanation?
Do endowments do well because they were “there
first”?
Other way to look at:
Funds that were undersubscribed
Funds which took a long time to raise
Same patterns appear!
The reality
Huge disparities in performance.
Superior performance has been largely confined to
endowments.
Raise substantial questions about ability of new
entrants to succeed.
Summary
Funds with higher sequence number, i.e.,
established funds, have performed better
→Lesson: Being early is critical
Rapid growth in capital under management was
associated with performance deterioration
May be driven by organizational challenges:
Funds with more partners per dollar managed have higher returns
Funds with higher partner-to-non-partner ratio have higher
returns. Decline in specialization leads to poorer performance
→Lesson: Managing growth is major challenge
Investors have had wildly uneven returns.
→Lesson: Having right investment partners matters
The special challenges of new private
equity markets
Lessons from Celtel, Skype and Shanda:
HBS field cases written on all three
Represent Africa, Europe and China
The checks have cleared!
All markets are global
Skype’s business model depended on consumers
calling across borders
Celtel’s pan-African strategy attracted international
telecoms equipment companies to become second
largest source of financing
Shanda’s revenues were more than 80% dependent
on a game written and owned by a Korean
company
Expect deals to be massively more
work intensive
Skype’s code was written in Estonia, the
management team was spread throughout Europe,
the customers were all over, and the founders could
not travel to the US
Celtel needed to raise over $400mm from 2001 to
2004 during the meltdown of the
telecommunication investing markets—all of it to
be spent in Africa
Shanda was threatened by a lawsuit from the
Korean vendor whose game accounted for most of
their revenue
Back to basics
Skype’s founders had control over a sale
Celtel had minority partners in all 15 of its
operations (i.e.: 15 different groups in 15 different
African countries). It also had an all common stock
equity capitalization
Shanda management was furious that SAIF sold
some stock after the IPO
The real value added is transparency
Skype owned its technology as a result of the VC
investment
Celtel had a prestigious board who insisted on
transparency and openly refused licenses that had
the taint of corruption
Shanda’s settlement with its key vendor was
negotiated by SAIF
Luck still counts
(this space intentionally left blank)
Advice: Top tier firms must be global
LPs will prefer to go global with people they know, but
will be skeptical about execution—so they will pursue a
mixed model
The top tier firms will need to be global to maintain top
tier status—there is simply too much information they
would otherwise miss, and the overseas growth and
return rates will be higher than US return rates
Global top tier firms will outperform local top tier firms
over longer periods of time
Brands will likely cross borders but are no guarantee of
success
Advice: Tourist VCs will not be successful,
you must be on the ground
Act global but think local.
Local, permanent, day in, day out presence is
an absolute must
Advice: The industry will not be
replicate that in the U.S.
Less developed PE markets require much
more resource on each deal
Investment strategy may vary from location to
location:
Less of a premium for early stage investing in less
developed markets
Advice: There are no settled models for
running a global private equity firm
Lots of models to choose from:
Large PE firms provide useful models of satellite
offices
There are interesting models of building an affiliate
firm with different GPs and LPs (Accel, Benchmark);
There are many examples of investment in
independent firms (Chengwei, Argnor)
But no set answers yet
Keys to success: communication among investing
partners, expectation setting between offices,
portfolio management globally
Advice: You can’t do this on the
cheap
Must be approached with the same intensity
and vigor and commitment as your most
important initiative
Advice: The key company value builder is
transparency
Exits are through one global market, whether they
are M&A or public floats (NY/London)
This is the lesson of the 60’s and 70’s all over again:
don’t treat portfolio companies as small
companies, treat them as large companies who
happen to be small right now
PE firms will need to stockpile management talent
and keep overseas offices staffed well enough for
frequent, persistent oversight of portfolio
companies
Five Easy Pieces (of Advice)
1. Top tier firms must be global
Global top tier firms will outperform local top tier firms over longer
periods of time
2. Tourist VCs will not be successful, you must be on
the ground
3. Overseas industry will not be replicas of U.S.
There are no settled models for running a global private equity firm
4. PE Firms can not go global on the cheap
Must be approached with intensity, vigor and commitment.
5. The key company value builder is transparency
Teaching the culture of minority equity ownership may be the lasting
legacy of US venture capital.
An appreciation of the current state of
play
Despite the record write-offs, liquidity constraints
(distribution drought & the denominator effect)
and possible defaults LPs are facing there seems to
be a continued interest in the asset class.
UK pension fund association (April 2009): continued support for the PE
environment through allocations
CalPERS to put less in stocks, raise bet on private equity (June 2009)
Role of private equity in institutional investor portfolios to increase,
says fund of funds manager Adveq (June 2009)
An appreciation of the current state of
play
Short-term tough with limited visibility
LP momentum
How to manage a new equilibrium
What is the new ‘normal’
How do normal people behave in ‘abnormal times’
Fundraising efforts
First-time fund (infra)
Follow-up fund
Who are you as a team/organization?
Track record
What is considered important
Survey institutional investors by BNY Mellon
(May 2009)
1. Alignment of interests
2. Transparency
3. Performance
4. ….
5. ….
Do you have a fundraising strategy?
Competency
Target
investors
FR
strategy
Time horizon
Track record
Who do you want to approach?
UHNWI
Family offices
Pension funds
Insurance funds
Endowments
SWFs
FoF
Other institutional investors
In the West or in EMs
Are EM LPs different than their Western
peers
Better understanding of EMs?
More sensitive to (Western) brand association
when selecting GPs
Diverting capital flows during crunch times
(reversed globalization)
Quite often larger allocations than Western peers
Often faced with regulatory restrictions
Lack of transparent decision-making and
communication process
And what do you know about them?
In particular:
Their asset allocation program
Geographical coverage
Recent performance
Their understanding and experience in PE and
alternative assets
Consistency of in-house team
Timeline of their liabilities
F.e. defined benefit vs. defined contribution plans
And who are you as a sponsor?
What have been your previous fund strategies?
Regional/country versus global?
Single- versus multi-industry approaches
Open ended or closed funds
How are you organized?
Who is doing fundraising? Fulltime?
Do you have Investor relationship managers?
What kind of communication protocol do you have
in place?
What comes first?
Putting the whole structure in place
Or raising funds and when feasible put stuff in
motion?
The latter occurring more often recently given the
uncertainty in the fundraising cycle
The use of FoF
Everybody has its own agenda
Is there still place for FoFs in an economic
environment where things are ‘back to basic’
Only very few FoFs have decent EM experience
(despite what they tell you)
Do you want to invest someone’s money you don’t
know (remember Bank of NY Mellon survey)
What kind of mandate do they have?
Did they (FoFs) deliver for their investors?
Let’s look at the reasons why they exist anyway?
The use of FoF
Avoid them if you can
Not instrumental for your business going forward
Reality is a bit against my position:
In hedge fund space 50% of commitments come
through FoF (but are more specialized as well)
‘Hot money’ issue is something you want to
avoid
UHNWI
Easier to build a relationship with
But reality tells us that given the time lag between
commitment and ‘draw down’ defaults are more
common than with institutionals
Often need a feeder fund to facilitate smaller
commitments
Your LPs
Do you believe it is your job to educate them?
On emerging markets?
On the asset class?
On expectation re returns?
The value-add of placement agents
Besides raising capital by putting their Rolodex to
work
Expansion of LP network beyond your core
geographies
Market your fund knowing local cultures re
fundraising and investment strategy
Add value towards PPM and content
The value-add of placement agents
How to position the fund towards investors
Pinpoint a meaningful amount to be raised
Coordinate road shows and be more efficient
Make your fundraising more efficient
Pimp up your marketing materials
What are the internal processes you have to go
through
Match LPs with your investment strategy-Who is
buying what?
Moving headcount among LPs
First-time funds
Feels often like climbing the Everest without
oxygen
Team-up with existing player
Work with non- financially focused LPs
Include anchor investors
LPs are not there to create a barrier to entry
Most LPs have boilerplate DD processes
whatever they proclaim
What are they looking for
Track record
Strategy
Significant realizations
Consistent application
Compelling returns
Ability to execute
Consistency
Uniqueness
Attribution
Clarity
Core attributes
Focus
Consistent top quartile performance
Desirable and differentiated strategy
Team
Strong & stable team
Proper firm structure
Structure
Stability
Lack of conflicts
Reputation/Integrity
Plan for succession
Ethical culture
Defendable fund size
Properly sized
Proper team motivation
Applicable experience
Market terms & conditions
Complementary skills
Track record
In what?
Barrier to entry
Why is it so important?
Sometimes legal constraints by institutional
investors
Impressive team & people versus track record?
Funds perform consistent within quartiles
History tells us something about the future
In particular important in environment where new
GP have been mushrooming
Strategy
ESG principles in EMs: risk management or value
creation?
In what strategies would that show up?
Real issue in relation to EMs
Are they all executed the same way
Relevant for your portfolio companies but also for
yourself as a GP
Team
What is the DNA of your team?
What is the set-up of the team? Locations?
How is decision-making shared?
How is the carry shared?
Stability- How are you going to execute your
strategy
Is your team ready for the ‘new normal’ ..i.e.
generating returns by improving operations and
creating synergies rather than leverage
Can your HC live up to that test?
Team
The HC rainmaker paradox
Human Capital center of excellence
Retention
Change management
Compliance
Organizational Development
Recruiting
Sourcing
Resource Development
The due diligence process
They will tell you that they have a very
sophisticated system which is thorough and even
groundbreaking
Reality is that most of the process is boilerplate
and based on gut feeling
Some of them will not go beyond your track record
That way great time ‘first-time funds’ are missed
out on
Be aware of those that tell you the are interested
in emerging markets but have never made an
allocation before
The due diligence process
Manage the timeline
It can also help you emerging your true potential
Often external advisors are hired to execute the
DD
Re-run of older fund number to measure
accurateness
What are they looking for?
Besides everything discussed
Deal flow origination capabilities
Exit strategies
The due diligence process
Important given the high dispersion of results in
the asset class
Excess returns depend largely on manager
selection
Identifying risk and relating then to the return
capacity of any given manager against the
background
of
competing
investment
opportunities
The due diligence process
Size, geography and strategy screen
Formal part starts with a meeting
Following that the LP will (in)validate the
investment thesis through
Site visits at GP and some portfolio companies
Reference checks with existing LPs, portfolio
company management team, etc
Track record analysis
Market positioning analysis
Review of legal conditions
Terms & conditions
Compensation
2 & 20
Alternatives? After the investment period?
Imputing transaction fees by GP?
Source: SJ Berwin AS 2009
Terms & conditions
Compensation
Carry vs. hurdle rate
Subject to delay until clawback unlikely
Source: SJ Berwin AS 2009
Terms & conditions
Fund structure
Open or closed fund structure
Key terminology
Basic considerations
Master/feeder structure
What types of vehicles to use
European vs. US vs. EM investors ?
You can’t be everything to everybody
Offshore structures(?)
Are you the danger zone after the G20
Terms & conditions
Fund structure
Tax transparency
Limited liability for LP and GP
Authorization and/or regulation of fund and
manager
Does it support an alignment of interest
between GP and LPs
Tax-efficient structuring of man. Fees and carry
Nature of co-investment arrangements
Permanent establishment & operational issues
Terms & conditions
Fund structure
Combining structures is an option
Increases complexity and costs but will appeal
to a wider range of LPs
Terms & conditions
Governance
EM GPs have reduced track record relative to their
Western peers
Different regulatory environment and legal
protection of shareholders/partners
Common law vs. Rule of law systems
Role of the Investment committee’s liabilities and
responsibilities
Pinning down investment policy to prevent style
drift
Terms & conditions
Managing expectations
Re future returns
Re existing funds
Re the latter:
Re-invest proceeds of realizations, including an
ability to re-draw proceeds already distributed
Extended investment periods or reopened a
closed fund to new capital, while some have
raised annex or top-up funds
Terms & conditions
Managing expectations: distressed situations
Allow (some) investors to scale down
commitments in exchange for some dilution of
their interest?
Do you know where you fit in your LPs portfolio?
Terms & conditions
Communication strategies:
LPs are your primary clients…ALWAYS!!!
How, how much and on what?
Portfolio valuation?
Deal affairs
Quarterly scorecards?
Watch how you communicate as it is determined
by your overall objective re the relation with
your LP/LP community
Key components of a good IR program?
Terms & conditions
No-fault divorce?
Once again downward protection mechanism
Big deal or not?
Terms & conditions
Who are your advisors?
Do they shine off on you?
Madoff
Stanford and the likes
Bring them in for hot issues:
Valuation of the entire portfolio once a year
Structuring the deal
Don’t be stingy: bring in the big guns-it will pay off
What do you want your lawyers to do
Selecting a law firm
Terms & conditions
Co-investment rights?
Benefits
Detriments
Limits
Consequences going forward
Terms & conditions
Co-decision rights?
Independence versus commitments
Value of independence
Board of advisors vs. Investment committee
Who is the captain on your ship?
Under what conditions
Financial conditions for anchor investors?
Terms & conditions
The Private Offering Memorandum
Purposes of the offering memorandum
Stages in the life of the offering memorandum
Sponsor considerations
Contents of the offering memorandum
Key terms
Marketing and regulatory considerations
Terms & conditions
The Private Offering Memorandum
Material omissions
Compliance with securities laws for private
placement of securities
What does it serve: (1) market the fund and (2)
describe risks to avoid liabilities, (3) facilitate
due diligence
Terms & conditions
Risk management in EM
Creating alpha?
What is the system you’re going to use?
How to deal with non-economic risk
Does Value-At-Risk work the same way here
Designing your own system is probably more
authoritative
Risk management
CLEAR (*)
framework
DESIX (**)
Opacity index
Prop.
research
(*)(*)
Corruption,
LegalLegal
systems,
Enforcement
policies, Accounting
Regulatory transparency
and quality
Corruption,
systems,
Enforcement
policies,transparency
Accounting&transparency
&
(**)
Deutsche
Bank
Eurasia
Group
Stability
Index
Regulatory transparency and quality
(**) Deutsche Bank Eurasia Group Stability Index
Terms & conditions
Put your money where your mouth is
How much do you support the fund with your own
money?
Difficult one for first-time-funds
Co-investing in deals by partners privately?
Cross-fund investing not appreciated by LPs
Terms & conditions
Distributions and balancing carry
Avoid clawbacks
Fund or deal level
Re-investment periods
…
Redemptions under what conditions
Contact
Riga Graduate School of Law
Law & Finance Chair
Strelnieku iela 4k-2
Riga LV-1010
LATVIA
[email protected]
Tel. +37167039230