The IFF School of Private Equity
Course Highlights and Agenda
Modern investment theory is moving steadily towards more balanced, diversified portfolios as pioneered by David Swensen and the Yale Model. Private equity has an important role to play as one of the key asset classes to which every investor will require significant exposure. This five-day residential course will dispel many of the prejudices and misconceptions to which this much misunderstood asset class is subject. It will also present a balanced account of the objections currently being raised against private equity in the media.
Already the programme of choice for many organisations around the world. The IFF School of Private Equity raised the bar in private equity training. Focusing on the practical aspects of private equity, this really is the only course of its kind that is designed with practitioners in mind.
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Private equity within a modern investment portfolio
- Multi-asset class investing
- Absolute returns
- The Yale Model
Changing views of risk
- The risk premium
- Markowitz and CAPM
- Subjective risk
- Material risk
- Towards a new view of risk
What is private equity?
- Distinguished from quoted equities
- Buyout and venture
How does private equity work?
- Investors (LPs) and Managers (GPs)
- Limited partnerships
- Quoted vehicles
- Primary and secondary markets
- Fund economics: fees and carried interest
How do private equity returns work (1)?
- Difference between compound and vintage year returns
- Calculating an IRR
- Understanding the J-curve
- The investment / divestment cycle
How does private equity stack up?
- Performance versus other asset classes
- Long-term versus short-term
How do private equity returns work (2)?
- Distinguish between allocated, committed, drawn down and invested capital
- Refer back to fund economics to consider the implications of these differences
- Measurement techniques
- Money multiples and their uses
- Money weighted returns
- Time weighted returns
- Annual returns
What is buyout?
- Development capital
Buyout returns in theory (1)
- How buyouts create value
- Earnings and how to define them
- Earnings growth
- Multiple increase in a perfect market
- Multiple increase in an imperfect market
Buyout returns in theory (2)
- Modelling and analysis
- Deal sourcing
- Exclusivity status
- Lead investor
- Partner attribution
- Quoted comparables
- An ear to the ground
Buyout returns in practice
- US and European returns compared and analysed
- Impact of mega fund capital
- Structural change in the market
- Influence of quoted markets
- Expectations for the future
Class discussion session
- How do we think buyout funds make money?
- What are the limitations on buyout returns?
- How might these play out in the future?
- What may the impact of mega-funds mean for patterns of equity ownership?
- Is the funding of the equity cycle infinitely renewable?
What is venture capital (1)?
- Applications, not inventions
- How has sector coverage changed?
- Life science
What is venture capital (2)?
- The US model
- Home run mentality
- Value add
- The traditional European approach
- The US model comes to Europe
Venture returns in theory
- Money multiples
- Cost and value
- IRRs and multiples
- Going in equity
- GIE as % of fund holding
- The impact of home runs
- Some thoughts on European returns
Venture returns in practice
- US out-performance versus Europe
- Just what happened in the mid-nineties?
- Multiples drive IRRs
- The Golden Circle
- Market conditions
- Europe – why the figures don’t tell the whole story
- Returns by fund size
- Returns by stage
- Expectations for future returns
The partnership fundraising process
- The fund cycle
- The investment cycle
- The fund and portfolio models
- The offering memorandum
- The presentation
- The offering meeting
- LP process
The LP process (1)
- Decision making in general
- Managing dealflow
- Managing expectations
- Need for process
- Preliminary review
- Dealing with serious candidates
- Due diligence
- Negotiating terms
- Management fees
- Start-up fees – what is included
- Carry – deal by deal, full payback, etc.
- Key man
- No fault divorce
- Limitations on transfer
The LP process (2)
- Planning a fund programme
- Legal / practical limitations
- Allocated capital
- Committed capital
- Drawndown capital
- Capital cycles and cashflow planning
- What to do with uninvested capital
The LP process (3)
- Advisory boards
- Anticipating the next fundraising
The venture funding process (1)
- Deciding on the preferred funding method
- Professional venture capital firms: stage sector, value add
- What is the story?
- Being realistic about the capital structure
- What v/c firms will be looking for
- Liquidation preferences
- Negative control
The Other Alternative Assets – Real Estate, Commodities and Private equity
- The commodity indexes and enhanced indexing
- Direct investments - private equity and real estate
- Real estate investment funds and reits
- Hedged and active commodities exposure
The venture funding process (2)
- Being realistic about executive staffing
- The presentation
- The pitch
- Negotiating terms
- Working together
- The traditional venture model– can the v/c perform?
- Exit discussions
- What to do when it goes wrong
The secondary market
- How it works
- Reasons for use
- Return expectations
The private equity “debate” (1)
- What exactly are the issues?
- Socio-economic considerations
- The future?
- Club deals and anti-competitive tendencies:
(a) company level
(b) fund level
The case for private equity (2)
- Short-term versus long-term considerations
- Creation of companies and jobs
- Venture capital’s economic impact
- Individual enrichment:
- Individual enrichment and responsibility: directors
- A force for free markets – breaking down old
- cultural attitudes
What You Will Learn
"It's a brilliant course and Guy is just great!"
"Overall the course sessions & the facilities were all very good. I found the sessions on Venture Equity particularly valuable. My understanding of the subject went from poor to excellent."
"very high professional level; this is the best course I've ever attended"
"The course met my expectations. My understanding at the start was poor but excellent at the finish. The course leader was very good. The case studies were very valuable"