Inside Private Equity: The Professional Investor's Handbook

by James M. Kocis, James C. Bachman IV, Austin M. Long III, Craig J. Nickels

Overview

Private equity, the business of investing in private companies, has quickly grown from a cottage industry to a mature asset class. For those that supply the money—the endowments, foundations, pension funds, family offices, and others—learning the business of private equity can be one of its principle challenges. Inside Private Equity was written for this audience to help provide a general understanding of how to invest in, monitor, and measure the performance and risk of private equity.

With Inside Private Equity, four experienced financial professionals—James Kocis, James Bachman, Austin Long, and Craig Nickels—share their broad range of private equity experience to help demystify this asset class.

Divided into four comprehensive parts—Setting the Foundation, Measurements and Comparisons, Topics on Risk, and Conclusions—Inside Private Equity opens with a brief introduction to this discipline and sets the stage for more technical discussions to follow. Here, you'll become familiar with everything from traditional industry measurements to a structured approach to portfolio management.

To discover this more structured approach, Inside Private Equity:

• Provides an exhaustive review of internal rate of return (IRR) calculations
• Outlines various peer universes and benchmarks
• Presents tools that will help you uncover both how and where wealth was gained and lost
• Examines the effect portfolio size has on performance expectations
• Explores two different modeling techniques for cash management
• And much more

By providing straightforward explanations and detailed examples of the concepts covered, Inside Private Equity demystifies many of the common assumptions about this asset class and puts the various pieces of the private equity puzzle in perspective.

A growing number of financial institutions and professionals are investing in private equity for its diversification benefits and the opportunity to participate in substantial long-term gains. But many are finding it difficult to manage things they can't always measure. Filled with in-depth insights and expert advice, Inside Private Equity focuses on what you can measure and how this process will allow you to better manage these assets—as well as your time.

Product Details

ISBN-13:	9780470471159
Publisher:	Wiley
Publication date:	03/23/2009
Series:	Wiley Finance , #495
Sold by:	JOHN WILEY & SONS
Format:	eBook
Pages:	288
File size:	2 MB

About the Author

JAMES M. KOCIS is the founder and President of the Burgiss Group, one of the leading software and financial service providers to the private equity industry. He and his team designed Private i, the world's most popular program for private equity portfolio management. Private i is used to manage in excess of $1 trillion of private equity investments.

JAMES C. BACHMAN IV, CAIA, is the Head of Research at the Burgiss Group. In this role, he is principally responsible for research-related initiatives as well as expanding the technology platform's portfolio management capabilities.

AUSTIN M. LONG III, JD, CPA, is the Head of Alignment Capital, a private equity consultancy. He has been active in the private markets since 1987, when he cofounded what was to become the University of Texas Investment Management Company (UTIMCO) private investment group.

CRAIG J. NICKELS, CFA, is the Director of Private Markets for Washington University in St. Louis, where his responsibilities include the oversight and management of the university's private market investments within the multi-billion endowment.

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Table of Contents

Foreword xi

Preface xvii

Acknowledgments xxi

How to Use This Book xxiii

About the Authors xxv

Part One Setting the Foundation

Chapter 1 Background 3

Chapter 2 Private Equity Perspectives 13

Chapter 3 Managing the Investment Process 29

Chapter 4 Capturing a Portfolio 51

Chapter 5 Tracking Portfolio Holdings 63

Part Two Measurements and Comparisons

Chapter 6 Standard Measures 79

Chapter 7 The IRR 89

Chapter 8 Universe Comparisons 111

Chapter 9 Flawed Research Methodologies 129

Chapter 10 Visualizing Private Equity Performance 137

Chapter 11 The IRR and the Public Markets 153

Part Three Topics on Risk

Chapter 12 Performance Attribution 165

Chapter 13 The Concentration of Wealth 175

Chapter 14 The Diversification of Portfolios 185

Chapter 15 Cash Management Models 193

Part Four Conclusions

Chapter 16 The Private Equity Professional 211

Chapter 17 Summary 217

Appendix A Proposed Venture Capital Portfolio Valuation Guidelines 221

Appendix B On-Site GP Audit Program Guide 223

Appendix C Qualitative Due Diligence: Structured Interview 225

Appendix D Qualitative Due Diligence: Structured Reference Calls 229

Appendix E Request for Information (RFI) 231

Appendix F Advanced Topics: Duration of Performance 235

Appendix G Advanced Topics: Correlation and Opportunity Costs 239

Appendix H Patent Summaries 249

References 253

Index 257