Beyond the J Curve: Managing a Portfolio of Venture Capital by Thomas Meyer

By Thomas Meyer

In recent years, enterprise capital and personal fairness cash became family names, yet up to now little has been written for the traders in such cash, the so-called restricted companions. there's way more to the administration of a portfolio a big gamble capital and personal fairness cash than often perceived. past the J Curve describes an cutting edge toolset for such restricted companions to layout and deal with portfolios adapted to the dynamics of this industry position, going a ways past the common and often-simplistic recipe to ‘go for prime quartile funds’.Beyond the J Curve offers the solutions to key questions, including:Why ‘top-quartile’ provides will be eager about an immense pinch of salt and what it takes to choose more suitable fund managers?What do constrained companions have to think of whilst designing and dealing with portfolios?How you possibly can verify the cash’ fiscal price to assist addressing the questions of ‘fair price’ lower than IAS 39 and ‘risk’ less than Basel II or Solvency II?Why is tracking vital, and the way does a constrained accomplice deal with his portfolio?How the portfolio’s returns will be more suitable via right liquidity administration and what to contemplate while over-committing?And, why uncertainty instead of probability is an argument and the way a restricted accomplice can deal with and enjoy the speedy altering inner most fairness environment?Beyond the J Curve takes the practitioner’s view and provides inner most fairness and enterprise capital execs a complete consultant making excessive go back goals extra life like and sustainable. This booklet is a must-have for all events occupied with this marketplace, in addition to educational and scholars.

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Extra info for Beyond the J Curve: Managing a Portfolio of Venture Capital and Private Equity Funds (The Wiley Finance Series)

Sample text

If you raise a first fund, you can usually raise a second within a few years because it is still too early to tell exactly how the first one has done—there are few realisations. The third one is always much harder because by then, you’d better have some results to show investors”. 13 Some investors, after all, are not driven solely by return objectives, but see “strategic” benefits. g. 14 Or they might be the relational benefits for a lending bank of investing with a manager who will need access to debt to finance leveraged transactions.

Based on this, one could conclude that investing in follow-on fund should not be an automatism, but requires a thorough review of the investment rationale and a comparison with other opportunities every time. While investors certainly have to go “for the best deal”, they need to understand that in a volatile economic environment, with continuously changing power between general and limited partners, there are trade-offs between long-term objectives and short-term gains. Consequently, there are a lot of key issues that either cannot be written in contracts or are not enforceable, and therefore need to be addressed in different ways.

If general partners understand that their current fund is underperforming, they will not be confident that another fund can be raised once their results become apparent to their investors. One way out for them may be to try raising a follow-on fund as quickly as possible. If raising a new fund is not possible any more, only r s in the context of the fund currently managed can be maximised. In this situation fund managers begin to resist the limited partners’ attempts to reduce fund size. Also, in cases where management fees depend on the valuation of portfolio companies, poor performers may try to maximise their income by avoiding writing down investments.

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