Private Markets

Difference between public and private investments

non controlling in standards contracts in mature companies Vs controlling in tailored termes across all the lifecycle + illiquidity

APLIIP difference between private and public markets

• Asset Prices (Observable Vs Negotiatied)

• Performance measurments (Periodic Vs Compounded)

• Liquidity

• Investment process (Open-ended, security selection Vs Close-ended, DD, Value creation, Exit)

• Investment manager skills (Industry, company financial analysis Vs +management, technical, legal…)

• Portfolio Diversification potential (correlation of returns Vs unique assets, lifecycle)

Private Asset investment lifecycle

• Pre-Commitment

• Commitment

• Capital Deployment

• Capital Distribution

• Exit

J-Curve effect

negative income at the beginning of holding period then growth and positive

Type of investment

• Direct Investment (risk of concentration, better for large asset owners)

• Direct Co-investment (reduce risk, can have good partner, bigger targets)

• Limited partner Co-investment (can be offered to large subscribers; LP closer to the strategy)

• Fund investment

ROI and IRR fromula

ROI = (1+IRR)^n

Mom & MOIC

TVPI

Why vintage years are important

Because according to economics conditions GP willl find it easy to find opportunities and deploy capital

Public Market Equivalent comparaison

A theoretical public market investment in which private fund cash outflows are invested in a public market index while cash inflows are sold from a public market index.

Advantage of secondaries

• diversification across vintage, partnership, managers

• Access to selective GPs

hard hurdle

Hurdle rate where the manager earns fees on annual returns in excess of the hurdle rate

soft hurdle

Hurdle rate where the fee is calculated on the entire return when the hurdle is exceeded

Catch up clause

A clause in an agreement that favors the GP. For a GP who earns a 20% performance fee, a catch-up clause allows the GP to receive 100% of the distributions above the hurdle rate until she receives 20% of the profits generated, and then every excess dollar is split 80/20 between the LPs and GP.

Clawback clause

Limited partnership agreement provisions that involve returning GP performance fees to LPs in cases where transactions that are initially successful later face losses.