Transcript No Slide Title

Private Equity: How to access
Wim Borgdorff – AlpInvest Partners
February 16, 2004
Agenda
•
Introduction to AlpInvest Partners
•
Co-investments
•
Fund Investments
•
Secondaries
•
Contact details and disclaimer
2
Profile AlpInvest Partners
A global private equity firm fully dedicated to private equity with
approximately EUR 20 billion under management
•
Independent firm with discretionary strategy and investment decision making
•
Global investment strategy with main offices in Amsterdam and New York
•
Full spectrum investor comprising primary and secondary fund investments, coinvestments, lead investments and mezzanine
•
Broad resources comprising over 100 staff members including 60 dedicated private
equity investment professionals
•
Institutionalized firm with long term commitment by key sponsors ABP and PGGM
who recognize private equity as an asset class to which they should have a long
term commitment
3
Integrated approach
SYNERGIES BETWEEN
SPECIALIZED TEAMS
KNOWLEDGE AND
RESOURCE SHARING
Deal flow
Fund
investments
Assessment
general partner
Secondary
co-investment
portfolios
Market
knowledge
Expanding
network
Coinvestments
Secondaries
Assessment
underlying portfolio
INTEGRATED INVESTMENT
DECISION MAKING
4
Three prerequisites to be a successful
private equity fund of funds manager
Broad market
reach and access
• Private equity
universe comprises
over 3500 GPs and is
expanding both in
terms of number as
well as shape and
form
Superior
Selection skills
Ability
Ability to
to
Improve
Improve terms
terms
And
And conditions
conditions
• Wide dispersion in
performance between
GPs
• Partnership
agreements not
‘standardized’
• Vast information
asymmetry between
GP and LP
• Expensive asset class
5
Difference in performance is material
6
•
Introduction to AlpInvest Partners
•
Co-investments
•
Fund Investments
•
Secondaries
•
Contact details and disclaimer
7
Investment approach
Investment strategy for later stage co-investments
•
Geographic focus: exclusive focus on expansion and buyout transactions both
in Europe and North America
•
Investment size: up to EUR 100 million with an average between EUR 20-60
million
•
Sweet spot: investments will typically be made to the extent that they fall
within the sweetspot of the general partner
•
Board representation: For substantial co-investments, AlpInvest Partners will
seek board representation
•
Diversification: expected to close on average 10 investments per annum
8
The added value of co-investments
CO-INVESTMENTS ENHANCE THE RETURN PROFILE OF A FUND INVESTMENT
PROGRAM
• Improve terms and conditions
– No transaction fee
– No management fee
– No carry
• Improve the selection capability for primary and secondary fund investments
– ... BY HAVING A VALUABLE LOOK ‘IN THE KITCHEN’
– Operating style
– Breadth and depth of organization including key decision makers
– Value creation skills
Bridge information asymmetry between GP and LP
• Reduce J-curve
This is further explained on the next slide
9
The added value of co-investments
CO-INVESTMENTS REDUCE THE J-CURVE OF A FUND OF FUNDS PRODUCT
250%
% of committed capital
200%
150%
100%
50%
0%
-50%
0
10
20
30
40
50
-100%
Time in quarters
J-curve FOF including 12.5% co-investments
J-curve FOF excluding co-investments
Source: AlpInvest Partners team analysis (The J-curve would further improve by adding a secondary allocation to the
investment focus)
10
Key success factors
AN INTEGRATED INVESTMENT APPROACH IS A KEY REQUIREMENT FOR
SUCCESSFUL IMPLEMENTATION OF A CO-INVESTMENT PROGRAM
• Origination
– A (significant) primary fund commitment is a prerequisite to attract coinvestment
deal flow
- Continuous marketing of co-investment appetite
• Execution
- A professional operating style including an efficient, transparent and
reliable decision
making process
- A two tier investment approach by making an in-depth assessment of both
the:
• GP and
• The transaction
A transaction should fit the GP’s ‘sweet spot’
11
•
Introduction to AlpInvest Partners
•
Co-investments
•
Fund Investments
•
Secondaries
•
Contact details and disclaimer
12
Investment approach fund investments
AlpInvest Partners adheres to a disciplined approach of investing
with the aim to annually select the best in breed managers:
• annual investment program approximately EUR 1.2 - 1.5 billion
• annually 20 - 30 commitments to primary funds
• geographically diversified (US, EU, Rest of the World)
ALLOCATION OF PRIMARY FUNDS
NORTH
AMERICA
EUROPE
EMERGING
MARKETS
TOTAL
10-25%
0-10%
0-10%
20-35%
BUYOUTS
10-30%
10-30%
0-10%
40-60%
LARGE BUYOUTS
10-20%
10-20%
0-10%
25-45%
30-60%
30-60%
5-25%
100%
VENTURE CAPITAL
GROWTH & MID-MARKET
TOTAL
13
Disciplined top-down allocation and bottom-up
selection
Top Down Allocation
Targets
Top Down
Allocation
•
Mandate; i.e. capital to be
deployed, target segments,
# slots and ticket sizes,
time-frame
•
Balanced Private Equity
Portfolio
Bottom Up
Selection
Short term Portfolio
Adjustments
14
Deriving top down allocation targets within the private equity asset class is a difficult and
painstaking process, due to imperfect and inconsistent data. However, opportunistic
allocation-approaches based on untidy research leads to herd behavior
...if you don’t know where you are heading, any road will get
you there...
15
Selection makes the difference
Graphical representation of estimated fund performance distribution for European 1995 funds
D
Source: AlpInvest Partners team analysis of Venture Economics data
16
•
Introduction to AlpInvest Partners
•
Co-investments
•
Fund Investments
•
Secondaries
•
Contact details and disclaimer
17
Focus
•
To provide liquidity or portfolio solutions for investors in private equity. The
spectrum of solutions ranges from
–
single limited partnership interest or entire portfolios of limited partnership
interests in primary funds
–
interests directly in portfolio companies underlying such primary funds
–
joint ventures
•
All investment stages and geographies may be included
•
Investment range between EUR 5 - 500+ million
18
Secondary investments are part of
integrated approach to private equity
markets
•
Similarities with primary fund investments and co-investments
–
–
•
Distinguishing features from primary fund investments
–
–
•
All transactions involve contacts with and co-operation of General Partners (i.e. transfer
consent and reference checks)
Access to proprietary information on General Partners and portfolio companies is crucial
for the assessment of transactions
Underlying assets are (largely) known vs. a blind pool
Secondary investments have earlier positive cash flows
Distinguishing features from co-investments
–
–
Portfolio of assets vs. one single asset
Secondary investments have earlier positive cash flows
19
•
Introduction to AlpInvest Partners
•
Co-investments
•
Fund Investments
•
Secondaries
•
Contact details and disclaimer
20
Contact details
For further information please contact
Wim Borgdorff Jan Moulijn – Head Marketing
Managing Partner, Head
Fund Investments
Office address
Jachthavenweg 118
1081 KJ Amsterdam
The Netherlands
Telephone
+ 31 20 540 76 10
+ 31 20 540 75 22
+ 31 20 540 76 33
Fax
E-mail
Postal address
P.O. Box 75304
1070 AH Amsterdam
The Netherlands
Wim Borgdorff
Jan Moulijn
Secretary Kristine van Peteghem
+31 20 540 75 03
[email protected]
[email protected]
[email protected]
21
Disclaimer
This confidential presentation (the “Presentation”) is being furnished to the recipient on
a confidential basis. By its acceptance hereof, each recipient agrees that the
Presentation may not be reproduced or distributed to others, at any time, without the
prior written consent of AlpInvest Partners and that the recipient will keep permanently
confidential all information contained herein not already in the public domains. The
recipient should only rely on its own examination of the information contained or
incorporated by reference in the Presentation. The distribution of the Presentation shall
not under any circumstances imply that the information contained in the Presentation is
correct as of a date subsequent to the date of the Presentation or create any implication
or constitute a representation that there has been no change in the business or affairs
of AlpInvest Partners or any other information contained in the Presentation since the
date hereof. The recipient should not construe the contents of the Presentation as
investment, legal, business, accounting, tax or other advice. Certain information
contained in this Presentation has been obtained from third-party sources. Although
AlpInvest Partners believes that such third-party sources are reliable and is not aware
of any misstatement as of the date of this Presentation, it has not independently
verified such information.
22