This set combines the definitive guide to private equity with its case book companion, providing readers with both the tools used by industry professionals and the means to apply them to real-life investment scenarios. 1) Mastering Private Equity was written with a professional audience in mind and provides a valuable and unique reference for investors, finance professionals, students and business owners looking to engage with private equity firms or invest in private equity funds. With a foreword by Henry Kravis, Co-Chairman and Co-CEO of KKR, and special guest comments by senior PE professionals.
- Net debt is arrived at by subtracting the value of a company’s liabilities from the value of its liquid assets.
- Prior to moving to Singapore in 2009, Bowen spent five years in the New York hedge fund industry in trading and business development roles.
- This book is everything I hoped it would be – logically organized and thorough, yet approachable.
- Mastering Private Equity is written delicately to fit professional audiences, including finance students, money managers, investors, business owners, and observers of the industry who are into engaging to private equity firms or invest in private equity funds.
- Non-generally accepted accounting principles (non-GAAP) performance measure used by several listed PE firms adjusting regular net income for income taxes, non-cash charges related to vesting of equity-based compensation and amortization of intangible assets.
- Prior to her current posting in INSEAD, he initially endeavored in the investment banking field in different cities, including New York, London, Singapore, Frankfurt, and Tokyo.
DPI reflects the realized, cash-on cash returns generated by its investments at the valuation date. It is most prominent once the fund starts exiting investments, particularly towards the end of its life. If the fund has not made any full or partial exits, the DPI will be zero.
Strategic Risk Management
Internal rate of return—a widely used measure of the return earned by investors from an individual investment, fund or portfolio of funds. It represents the discount rate that renders the net present value of a series of cash flows zero. It provides detailed perspectives of the private equity world, and how private capital will be shaped. I wish I had read this book as part of my academic curriculum during my school tenure. I highly recommend the book to those interested in building a career in investment banking and PE. This book suits Mastering Private Equity perfectly well as both are necessary to effectively present theories and practices in the field of private equity.
At times however, the industry is criticized as a short-sighted asset stripper, which destroys jobs and over-leverages its companies. The complexity of private equity has confused many casual observers including journalists. They attribute the success of the industry either to some mythical secret sauce or a ruthless approach to cost cutting and asset stripping. In the authors experience, however, the competitive advantage of the private equity investment model comes from diligent application of best practices, as described in this book, a keen focus on big drivers of risk and opportunity and, above all, a lot of hard work. Venture Capital Handbook covers everything you need to know about raising venture capital. Whether you are starting a business, buying a business, or seeking capital to expand an existing business.
Acquisition of a corporate division, business unit or subsidiary and conversion into a standalone company. The way a company finances its assets and operations by using different sources of funds such as equity, debt or hybrid securities. A document describing a company’s strategic vision, key value drivers and forward-looking Mastering Private Equity Set Review risks and opportunities with a multi-year financial forecast. AIVs are structured to accommodate one or more special investments made outside of the primary fund (and/or a parallel fund). A plan that outlines clearly the changes to be achieved by a company during the first three months post-investment.
Wealth management advisory firms that manage the portfolios of high-net worth individuals or families. Represents an agreement to pay a portion of the purchase price at a later date based on the performance of the business. A pricing mechanism that adjusts the preliminary purchase price based on the difference forex between a company’s net debt and target working capital at signing and the actual balance sheet values at closing. Investing side by side with a PE fund directly in an operating company. In the context of PE, funds have a finite lifespan with no redemption prior to the expiration of the fund.
Like the LN PME, the PME+ allows for a direct comparison between the PME+ IRR and the PE fund IRR, and avoids negative PME NAVs. One weakness, however, is that it does not match the cash flows perfectly. As the fund’s investments begin to mature and are exited, portions of its value are realized and reflected in its DPI. In our example, the fund’s first exit took place in year 4, producing a DPI of 0.20. Exhibit 3 shows the evolution of the TVPI, DPI and RVPI for a hypothetical fund over its entire life. The “paid-in” in TVPI, DPI and RVPI represent the total amount of capital called by a fund 4 at any given time.
Alternative Investment Vehicles (aivs)
2) Private Equity in Action takes you on a tour of the private equity investment world through a series of case studies written by INSEAD faculty and taught at the world s leading business schools. Mastering Private Equity was written with a professional audience in mind and provides a valuable and unique reference for investors, finance professionals, students and business owners looking to engage with private equity firms or invest in private equity funds. The first comprehensive guide for mastering venture capital Essentials of Venture Capital is your guide to understanding how venture capital and technology finance works from the inside out.
Often positioned as the definitive guide to demystifying the venture capital business, this book goes deep on everything from raising funds and structuring investments to defining exit strategies and pathways. Sprinkled throughout the book are insights from more than 25 of the field’s leading practitioners. This book encompasses different theories and concepts of private equity, including deal sourcing, exits, responsible investment, development of operational value, and risk management. This book was written to synthesize surrounding private equity information as it tries to fragmentize individual concepts into sub-parts for a relatively intelligent acquisition of knowledge. The private equity asset class has unique characteristics, including the irregular timing and size of cash flows, making the measurement of returns far from straightforward and difficult to benchmark with other asset classes.
The following chapter comes from Mastering the Art of Asset Allocation, which focuses on the knowledge and nuances that will help you achieve asset allocation success. Not exactly a super technical book but I just got done reading King of Capital and I honestly think its an informative read because of how the authors break down why Blackstone did the deals it did. The second last chapter highlights 3 deals (Gerresheimer AG, Merlin Entertainment and Travelport Inc.) by focusing specifically on value creation done by Blackstone. A legal entity set up for a special purpose and to isolate financial risk. Investment vehicle through which investors finance an entrepreneur’s efforts to locate, acquire and manage a company. Non-bank lending from institutional investors (e.g., funds and insurance companies). In an open-ended fund structure, funds can be raised at any time during the life of the fund and the fund has an indefinite term.
Investors are given the right to “opt in” to (or “opt out” of) each investment opportunity that the manager of the fund presents. Also known as the investment multiple, it is the ratio of the realized and unrealized fund/equity value divided by the capital invested in the fund/company. Reduction of a fund’s management fee by a percentage of the fees collected from a fund’s portfolio companies. Co-investment funds are vehicles set up by the GP to invest alongside the primary and parallel funds for a portion of a single investment. The co-investment is typically provided by one or more of a fund’s LPs at lower fee and carried interest terms; at times the funds may be drawn from an external party.
Mastering Private Equity – this book provides a significant and timeless reference for financial professionals who are thinking about engaging with firms that delve in private equity or invest in private equity funds. The book is systematic literature that digs deep into the core concepts of private equity.
Having 20 years experience on Wall Street but only 5 in PE, it is hard to find a new position in PE without fully talking the talk and understanding every aspect of the business. This book is everything I hoped it would be – logically organized and thorough, yet approachable.
Global Asset Allocation: A Survey Of The Worlds Top Asset Allocation Strategies
To understand how these ratios evolve over a fund’s life, the following definitions are helpful. This background note was written by Alexandra Albers-Schoenberg, Associate Director at INSEAD’s Global Private Equity Initiative , under the supervision of Claudia Zeisberger, Professor of Entrepreneurship at INSEAD and Academic Director of the GPEI.
A frequently cited method is the public market equivalent approach, an index-return measure that takes the irregular timing of cash flows in PE into account. PME compares investment in a PE fund to an equivalent investment in a public market benchmark (e.g. the S&P 500). Selecting the right index when using a PME method to find alpha is important, as different indices can provide a completely different picture. Furthermore, PE is dominated by outliers, which are difficult to “index”, and its risk-return patterns are quite distinct from more traditional asset classes. It is challenging to gain broad (index-like) exposure to PE, unlike public markets were building a diversified portfolio is quite straightforward. ValueWalk.com is a highly regarded, non-partisan site – the website provides unique coverage on hedge funds, large asset managers, and value investing. ValueWalk also contains archives of famous investors, and features many investor resource pages.
This begins by leaving behind many of those financial theories that institutions normally cling to as a safe harbour for managing risk. Once divested of such false comforts, investors will be in a position to identify their real options and take an active and strategic approach to alternative Currencies forex investing. Mastering Private Equity is written delicately to fit professional audiences, including finance students, money managers, investors, business owners, and observers of the industry who are into engaging to private equity firms or invest in private equity funds.
Debt Commitment Letter
The hurdle rate, frequently set at 8%, will be negotiated during fundraising. Foreign exchange market Proportion of shares of a listed company that is traded in the stock market.
Investing in companies with the aim of achieving a social return component in addition to a financial return target. The preferred return to investors before a carried interest is permitted.
We wish to thank Michael Prahl and Bowen White, both INSEAD alumni, for their significant input prior to completion of this note. It is intended to be used as a basis for class discussion rather than to illustrate either effective or ineffective handling of an administrative situation. Additional material about INSEAD case studies (e.g., videos, spreadsheets, links) can be accessed at cases.insead.edu. Please speak to a licensed financial professional before making any investment decisions. It’s a textbook written with an easy-to-read approach which is nice for a technical field like PE. Barbarians at the Gate – Bryan Burrough & John Helyar deep dive in to KKR, the RJR Nabisco deal & the players involved. Trusted by over 1,000 aspiring private equity professionals just like you.