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Private Equity Emerging From the Deep?
David Currie, partner and chief executive at SL Capital Partners, reports in the FT, Most pensions need help with private equity investment:
Following the publication of the FTfm article, ‘Sceptical investors taking the more direct route’
(July 11 2010), discussions in the press have focused on the private
equity fund of funds sector and the idea that pension funds will shift
from investing via these vehicles to a more consultant-led or direct
investment model.
Historically,
pension funds have used a mix of strategies to deploy their private
equity allocation depending on their own size and experience in the
asset class. We agree that some of the largest pension funds and
sovereign wealth funds have their own direct private equity strategies
to deploy capital that involve a mix of direct and fund investments.
However,
we are convinced the majority of global pension funds remain open to
the idea that the additional layer of fees charged by private equity
fund of funds represents a price worth paying to get the requisite
access and the assurance over administration and compliance that an
experienced manager can bring. Our pension fund clients engage us to
provide a complete private equity solution for what is typically only
ever up to 5 per cent of their total investment portfolio.
The
majority of pension funds do not have the €100m (£83m, $132m)
allocation to private equity that has been noted as the level that would
allow them to invest directly in a structured long-term way into
private equity. For these schemes, the hurdles of minimum allocation,
administration of the investments and the risk diversification mean that
a fund of funds is the only viable route.
In SL Capital’s fund
of funds, the average commitment by a client is €12m, which would
normally represent the pension fund’s entire private equity commitment,
or at least its entire US or European private equity commitment. It is
impossible to get true diversification, across at least 10 private
equity funds, with a €12m allocation, as most funds require a minimum
commitment of €5m.
It is also worth noting that the larger funds
of funds sit on the private equity funds’ advisory boards as a matter
of course. These positions are open only to the largest or most
sophisticated investors and offer a deeper access and relationship to
the manager, enabling added insight, a view on strategic direction and a
first look at valuations and performance. This really matters when
times are difficult, as the experienced fund of funds investors can
deploy their team’s deep knowledge and expertise to help restore
confidence in leadership or offer solutions to ensure all investors are
protected.
While the world’s largest pension funds operate
significant teams globally, we as a fund of funds also work closely with
them to deploy capital. In this case we are providing support in a
specific area of the European or US markets that they find hard to
access, due to their proximity to the market or knowledge of the best
managers in that segment. In these terms we are the “eyes and ears” for
these larger groups in specific areas, such as smaller, regional or
local funds, secondaries and direct co-investments. They recognise the
advantages of working with fund of funds that can add value to their
overall programme.
PE funds and funds of
funds got hit hard during the crisis. But there is evidence that PE is
finally turning the corner.
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Leo, nobody believes you
'Investor confidence is returning'?
Leo, you've gone off the deep end, seek help.
Useless parasites deserved to go away for their mistakes. But, of course, in a political system that rewards corruption and nepotism, 'deserves' has nothing to do with it.
Carlyle Group? Leveraged 30:1 on Ginnie Maes right at the *very top* of the mortgage market. IIRC, they were the fuse that lit Bear Stearns.
Blackstone? Two words: Stuy Town. Screwed everyone they touched, then just walked away. Buying bankrupt hotels with $750K in debt per room? What earthly use are they?
TPG? Clowns that bought WaMu? What was their basis on that trade, something like $12/share?
Warburg Pincus... I recall they had a basis of like 35 in ABK. Hope they staked the firm on that position.
Worst clowns of all... Cerberus. Did you read their sheets from right before the crisis? It was like they owned every debt-ridden deep cyclical on the planet.
"as investor confidence is returning"...that statement alone should make you stop reading..
private equity....synonym for pimp.
DOW and SP500 weekly charts update :
http://stockmarket618.wordpress.com
The best indicator right now for the stock market are the pinksheets.
All the rest of the stock may look good, but the pinksheets are really bleeding.
Pinksheets in general are pretty risky bets, and their prices show nobody wants to take these bets. Also there, the volume is as good as ZERO.
Tumblin' along...with the tumblin' tumbleweeds...
30 words are Leo's, 3000 words are cut & paste
A real critical thinker this Leo is...........PMSL
Alas, he is only pointing up the herd mentality of Pension Folks. If the economy double dips from here, the pension funds, who have just finished loading up on equities, will collapse and cheat a whole generation of pensioners. However, if Leo is right, happy days are here again and everyone who receives a pension can again sleep at night.
Neither a pensioner nor a pension plan investor be.
Hope and and empty sack.
How the hell do you manage a fund of private equity funds? Different investors put money into a fund at different times which in turn is deployed to different PE managers at different stages of their acquisition-->divestiture process (and capital calls?) with different lock-ups ? Yikes.
What Would Cramer Do?????