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Everything You Want to Know about Private Equity

This is a comprehensive set of answers to many of the typical questions investors have regarding private equity. The answers are roughly organized into sections along these lines: General questions/background, legal questions, performance questions, due diligence questions, and exit questions. That said, there is overlap between the answers.  The author’s originally published this article for VC Experts, while most of the information is current (and all of it is informative) there have been some changes with the Dodd Frank Act. In particular this is true of the information related to the investment adviser registration. We will add some updated information to that section in the near future. Read More

The Renewed Family Office Interest in Direct Investing

In this interview Michael Zeuner, a Managing Partner at WE Family Offices, discusses the renewed appetite among family offices for direct investing. Michael’s discussion with ACE Portal’s CEO, Peter Williams, is wide-ranging yet succinct. They cover why families are gravitating from private equity into direct investing, fee arrangements within transactions, sourcing deal flow, conducting expert due diligence, and organizing amongst families.

 

About WE Family Offices

WE Family Offices is a different kind of wealth advisor. WE stands for Wealth Enterprise and the core of their work is based on the simple tenet that families who are able to successfully manage their wealth do so as they would a business. They build Wealth Enterprises.

Founded on a set of core beliefs, their mission is to work with each client – each different, each complex in their own way – to offer them insight into their wealth management, give them the information they need to make critical decisions, and support to manage their wealth successfully.  It’s about control. It’s about clarity. It’s about knowing where you are in relation to your goals. At your level of wealth they understand it can be overwhelming, but WE Family offices is here to help.

Evaluating a Multi-Family Office

Multi-Family Offices are more and more common. Are they right for you?

The family office, a product of the early twentieth century, is rapidly evolving in response to a number of factors: the turmoil from the recent consolidation and personnel changes in financial services firms, a heightened sense of the need for improved risk management and objectiv­ity and the high cost of attracting and retaining the professional talent needed today to advise and serve family members on a wide range of issues.

Just a couple of decades ago a fortune of $50 million was more than sufficient to justify directly employing a staff of accountants and in­vestment managers to keep track of the family finances, including the holdings of various trusts and foundations. Today, the “break even” point is closer to $250 million and climbing. Hence, many former single-family offices have grown into multi-family offices (“MFOs”), offering unrelated families the ability to share a CFO, CIO, tax professionals, and experienced administrative staff as well as valuable intellectual and technology resources.

In many ways it has parallels to the emergence of fractional jet ownership as high net worth individuals ask, “Given my needs, would I rather own all of a single engine plane or a share of a private jet? And, would I like to pay someone else to worry about hiring the peo­ple to fly it and care for it, handle security, do the safety checks, update the insurance and all the other hassles of maintaining a group of personal employees?” Similarly, contracting for a “share” of the staff at an established MFO often can securely provide access to talent, processes, intellectual capital and sys­tems that simply cannot be justified at lower asset levels.
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Your Deal But My Terms – A Primer on Private Market Terms & Conditions

In this episode of Insights, ACE Portal’s Co-Founder and CFO, Carl Torrillo, discusses deal terms and conditions with Ross Barrett, Co-Founder and CEO of VC Experts.  The interview drills down into areas of interest for private market investors.

Specific topics covered include:

  • Anti-dilution provisions
  • Valuation considerations
  • Maintaining management incentives (the law of unintended consequences)
  • Dividend rates (accrued or not)
  • Covenants and Board Rights

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Evaluating Private Equity Performance: Looking Beyond IRR

How do you best evaluate the performance of a private equity fund? Is there one right way? Why is the popular Internal Rate of Return  popular and potentially flawed? How do you truly gauge a manger’s performance and compare it to others? How do you select the best PE Fund Manager? The answers to these questions not only take you beyond that IRR but also beyond the spreadsheets and all the numbers. This guest post, originally from Private Equity International and featured in VC Experts’ Guide to Private Equity, investigates how science and art meet in evaluating private equity  performance.

 

A High IRR Gets Attention

“Just look,” smiles the placement agent, “at those IRRs. These guys know how to deliver serious returns.” The head of private equity investment looks at the memorandum on his desk and can’t help but revisit the chart showing annualised IRRs for the private equity firm’s previous funds. The numbers look impressive. And that’s one reason why IRRs matter so much in private equity: a high IRR figure for your fund has been shorthand for saying that you’re very good at making money. When you’re out fund raising, competing for the attention of an investor who is wary of taking a meeting and quick to remind you how busy they are, an eye-catching IRR is a great attention grabber. “Sure you’ll have investors telling you that IRR doesn’t mean anything to them, but you still find them sniffing round the number as soon as the conversation starts,” says one general partner at a UK buyout firm who regularly pitches to investors.

To declare that IRR is an empty formulation would be wrong, but to suggest that it has been significantly compromised in the eyes of many investors is not.
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Investing Directly as an LP or via Fund of Funds?

This article, penned by Igor Sill, a Managing Director of Geneva Venture Management, was originally penned in the uptick following the 2008 crisis when investor interest in Venture Capital again started taking stage amidst high-profile names such as LinkedIn, Facebook and Twitter. It seems apt to re-air Igor’s discussion of how investors can approach investing in private companies and early-stage companies in light of the recent explosion of online portals (of which ACE is one) and the re-imaging of direct investing in a fee-free model. Read More

Allocating Your Portfolio to Alternative Investments

Reports of how leading asset-allocators such as the Yale endowment have increased their returns while lowering risk has generated widespread investor interest in alternative asset classes. This should come as no surprise: the concept of achieving superior risk-reward combinations through diversification into different, uncorrelated asset classes certainly extends to adding private investments to one’s portfolio.

But understanding that alternative investments might benefit your portfolio is very different than actually investing in them. Even on the more macro/portfolio level thinking through exactly what percentage of your portfolio to allocate to alternative investment opportunities is a very complicated endeavor. Why?

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