Private  Equity  Performance  Vol.  II  2013  

www.privcap.com  

Based  on  Privcap’s  PE  Performance  Report,

Vol. II, 2013  

In  this  slideshow:  

•  What  is  the  ILPA  Benchmark?  •  Niche  Marketing  Strategies  •  How  is  Growth  Equity  deNined  and  measured?  

•  Inside  the  Private  Equity  Overhang  

The  benchmark  is  a  subset  of  the  overall  Cambridge  benchmark.  ILPA  asks  its  members  for  their  portfolios,  aggregates  the  list  and  passes  all  the  information  to  

Cambridge,  which  then  runs  its  benchmark  on  the  institutional  fund  set.  

The    ILPA  Private  Markets  Benchmark  

Benchmark  Components:  • U.S.  Private  Equity• U.S.  Venture• Global  Distressed• Global  NaturalResources

• Global  PE  and  Venture• Global  Fund  of  Funds/Secondary  FundsMichael  Elio  of  ILPA  and  Andrea  Auerbach  of  Cambridge  Associates  

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How  to  Market  a  Niche  Strategy  Performance  is  a  GP’s  best  marketing  tool.  But  demonstrating  performance  isn’t  always  easy,  especially  for  managers  with  niche  strategies  that  don’t  Nit  

into  neat  categories  for  benchmarking  against  peers.  

Things  to  Consider:    What  other  selections  will  investors  evaluate?  “If  the  selection  will  put  you  against  a  group  executing  a  strategy  that’s  wildly  different  from  a  risk-­‐return  proNile—an  industrial  focus,  something  like  that—it  will  make  it  difNicult  to  win  the  business.”    Who  is  your  audience?  “If  you’re  in  front  of  a  person  who’s  interested  in  private  equity  strategies  with  private  equity  returns,  it’s  probably  not  a  good  idea  to  talk  about  a  niche  debt  strategy  which  has  a  private  equity  structure.”    

         –  Stefanie  Langer  Stefanie  Langer,  Independence  Capital  Partners    

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“The  groups  that  heretofore  might  have  been  doing  venture  or  buyouts  but  found  that  more  

DeNining  &  Measuring  Growth  Equity  

Growth  Equity  De?ined:  Source:  Cambridge  Associates  LLC  •  Investor  takes  a  minority  position  (less  than  50%  ownership).  

•  Company  typically  has  no  prior  institutional  investors;  company  is  often  founder-­‐owned.  

•  Additional  rounds  of  Ninancing  are  not  expected  until  exit.  

•  No  (or  minimal)  leverage  is  used  at  initial  investment.  

•  Company  is  typically  EBITDA  positive  or  expects  to  be  within  12  to  18  months.  

•  Invest  at  growth  inNlection  point  where  capital  can  drive  organic  revenue  growth  in  excess  of  10%.  

•  Company  has  an  established  product  or  services,  existing  customers,  and  business  model.  Investment  theses  underwritten  on  deNined  plan  to  achieve  proNitability.  

“The  groups  that  heretofore  might  have  been  doing  venture  or  buyouts  but  found  that  more  competitive  may  want  to  do  growth  because  it’s  allowing  them  to  deploy  more  capital.”    

-­‐  Stefanie  Langer,  Independence  Capital  Partners    

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“What’s  interesting  about  the  overhang,  is  that  there’s  some  amount  of  capital  that  should  overhang  the  market,  otherwise  managers  would  invest  all  their  money  and  then  constantly  be  fundraising—and  we  don’t  want  that.”  

-­‐Andrea  Auerbach,  Cambridge  Associates    

“I  do  think  that  the  overhang  will  continue  to  grow  but  I  think  the  components  of  the  overhang  will  change.”  

 -­‐Michael  Elio,  ILPA    

Is  the  ‘Overhang’  Overblown?  The  private  equity  overhang—the  amount  of  capital  raised  by  private  equity  funds  that  remains  uncalled  and  available  for  investment—is  down  considerably  from  its  peak.  It  dropped  from  a  high  of  $445  billion  at  the  end  of  2009  to  $325  billion  at  the  

close  of  2012,  according  to  investment  adviser  Cambridge  Associates.  

Stefanie  Langer,  Michael  Elio,  Andrea  Auerbach  

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