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Private Equity Performance Vol. II 2013
www.privcap.com
Based on Privcap’s PE Performance Report,
Vol. II, 2013
In this slideshow:
• What is the ILPA Benchmark? • Niche Marketing Strategies • How is Growth Equity deNined and measured?
• Inside the Private Equity Overhang
The benchmark is a subset of the overall Cambridge benchmark. ILPA asks its members for their portfolios, aggregates the list and passes all the information to
Cambridge, which then runs its benchmark on the institutional fund set.
The ILPA Private Markets Benchmark
Benchmark Components: • U.S. Private Equity• U.S. Venture• Global Distressed• Global NaturalResources
• Global PE and Venture• Global Fund of Funds/Secondary FundsMichael Elio of ILPA and Andrea Auerbach of Cambridge Associates
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How to Market a Niche Strategy Performance is a GP’s best marketing tool. But demonstrating performance isn’t always easy, especially for managers with niche strategies that don’t Nit
into neat categories for benchmarking against peers.
Things to Consider: What other selections will investors evaluate? “If the selection will put you against a group executing a strategy that’s wildly different from a risk-‐return proNile—an industrial focus, something like that—it will make it difNicult to win the business.” Who is your audience? “If you’re in front of a person who’s interested in private equity strategies with private equity returns, it’s probably not a good idea to talk about a niche debt strategy which has a private equity structure.”
– Stefanie Langer Stefanie Langer, Independence Capital Partners
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“The groups that heretofore might have been doing venture or buyouts but found that more
DeNining & Measuring Growth Equity
Growth Equity De?ined: Source: Cambridge Associates LLC • Investor takes a minority position (less than 50% ownership).
• Company typically has no prior institutional investors; company is often founder-‐owned.
• Additional rounds of Ninancing are not expected until exit.
• No (or minimal) leverage is used at initial investment.
• Company is typically EBITDA positive or expects to be within 12 to 18 months.
• Invest at growth inNlection point where capital can drive organic revenue growth in excess of 10%.
• Company has an established product or services, existing customers, and business model. Investment theses underwritten on deNined plan to achieve proNitability.
“The groups that heretofore might have been doing venture or buyouts but found that more competitive may want to do growth because it’s allowing them to deploy more capital.”
-‐ Stefanie Langer, Independence Capital Partners
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“What’s interesting about the overhang, is that there’s some amount of capital that should overhang the market, otherwise managers would invest all their money and then constantly be fundraising—and we don’t want that.”
-‐Andrea Auerbach, Cambridge Associates
“I do think that the overhang will continue to grow but I think the components of the overhang will change.”
-‐Michael Elio, ILPA
Is the ‘Overhang’ Overblown? The private equity overhang—the amount of capital raised by private equity funds that remains uncalled and available for investment—is down considerably from its peak. It dropped from a high of $445 billion at the end of 2009 to $325 billion at the
close of 2012, according to investment adviser Cambridge Associates.
Stefanie Langer, Michael Elio, Andrea Auerbach
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For more private equity video interviews, special reports and
commentary, visit www.privcap.com Share this slideshow