Beyond the J Curve: Managing a Portfolio of Venture Capital and Private Equity Funds
Thomas Meyer
Language: English
Pages: 366
ISBN: 047001198X
Format: PDF / Kindle (mobi) / ePub
In recent times, venture capital and private equity funds have become household names, but so far little has been written for the investors in such funds, the so-called limited partners. There is far more to the management of a portfolio of venture capital and private equity funds than usually perceived. Beyond the J Curve describes an innovative toolset for such limited partners to design and manage portfolios tailored to the dynamics of this market place, going far beyond the typical and often-simplistic recipe to 'go for top quartile funds'.
Beyond the J Curve provides the answers to key questions, including:
- Why 'top-quartile' promises should be taken with a huge pinch of salt and what it takes to select superior fund managers?
- What do limited partners need to consider when designing and managing portfolios?
- How one can determine the funds' economic value to help addressing the questions of 'fair value' under IAS 39 and 'risk' under Basel II or Solvency II?
- Why is monitoring important, and how does a limited partner manage his portfolio?
- How the portfolio's returns can be improved through proper liquidity management and what to consider when over-committing?
- And, why uncertainty rather than risk is an issue and how a limited partner can address and benefit from the fast changing private equity environment?
Beyond the J Curve takes the practitioner's view and offers private equity and venture capital professionals a comprehensive guide making high return targets more realistic and sustainable. This book is a must have for all parties involved in this market, as well as academic and students.
Beyond the J-curve Managing a Portfolio of Venture Capital and Private Equity Funds Thomas Meyer & Pierre-Yves Mathonet This is the first work that I have seen that comprehensively covers the important subject of valuing, evaluating and measuring the performance of private equity funds. Much has been published in journals and papers on individual aspects of this controversial subject by various segments of the stakeholder universe – usually putting forward partisan viewpoints. This is the
death or other grave causes”. While the analogy with marriages is strained, there are some important similarities, e.g. that all sides share equally in both risks and rewards. Partnerships should be structured so as to minimise the costs to limited partners, to optimise the revenues to general partners so that they reflect their added value and the market conditions, and to maximise the back-end payouts to all partners. Trust and open communication on both sides and confidentiality vis-à-vis
fund portfolios. Their innovative and integrated approach aims at opening up the framework within which these valuations are practised by investors, and offers alternatives. This is a welcome angle to the current debate among investors, private equity and venture capital practitioners. The subject is likely to spur substantial discussions and additional technical publications. Beyond the J Curve is certainly a thorough and pioneering contribution to that debate. Javier Echarri, Secretary General,
public equity, which is based on the past performance of the assets in terms of risk and return measures as a proxy for the future investment performance. They try to exploit perceived low levels of correlation in different private equity segments across geographical regions. While such an approach certainly has its merits, there are a series of practical problems associated mainly with the limited availability and quality of financial data for private equity. As data only becomes reliable for
“black boxes”, this may be driven to the extreme. There is a heavy dependence on “proven” models and high quality data that give reliable forecasts. At the other extreme, according to Swensen (2000), “judgemental investors rely on ‘gut instinct’, managing portfolios by the seat of their pants. Sensible investment operations avoid both extremes, melding reasonably rigorous quantitative disciplines with a substantial dose of informed judgement. Combining hard quantitative inputs with soft