Private Equity Laid Bare

This case study presents a debate between Edward, advocating for the Yale endowment model and significant private equity investment, and Hatter, defending Queen’s College, Oxford’s successful, low-cost, largely passive approach. The discussion highlights contrasting investment philosophies, analysing the performance and risks of various strategies including private equity, hedge funds, and direct investing. A key point of contention is the illiquidity premium, with Edward arguing that patient capital earns extra returns in illiquid markets, while Hatter counters that this premium is competed away due to high demand. The Canadian pension fund model, focusing on factor investing and a reference portfolio, is introduced…Read the postAI does my Endowment and Canadian investment model case study

This paper by Ludovic Phalippou critiques the widespread use of since-inception Internal Rate of Return (si-IRR) to assess private equity performance. Phalippou argues that si-IRR is misleading, significantly inflating perceived returns and driving excessive capital allocation to private equity. He demonstrates how si-IRR is highly sensitive to early cash flows, susceptible to manipulation, and not a true rate of return, unlike calculations in public markets. The author proposes using horizon IRRs – returns calculated over fixed periods (e.g., 5, 10, 15 years) – as a more accurate and less manipulable alternative, while acknowledging limitations even with this approach. Ultimately, the paper aims to expose…Read the postAI does my IRR paper

AI-Generated Summary This research paper examines the relationship between financial leverage and COVID-19 death rates in English care homes. The authors argue that high financial leverage, particularly when accounting for operating leases, significantly increases death rates, especially during the first wave of the pandemic. This is because highly leveraged care homes are more likely to cut costs aggressively, potentially compromising resident care. The authors also find that care homes controlled by private equity firms do not have higher death rates once financial leverage is accurately measured. This suggests that the ownership structure itself is less relevant than the level of…Read the postHow Deadly Is Financial Leverage? Evidence from Care Homes during the COVID-19 crisis

Summary The paper, titled “On Secondary Buyouts”, examines the increasing trend of private equity firms selling companies to each other in secondary buyout (SBO) transactions. The authors find that SBOs underperform, particularly when made by firms under pressure to spend capital, but SBOs performed as well as other buyouts when no such pressure existed. Moreover, SBOs between firms with complementary skillsets outperform other buyouts. The paper also examines the controversial issue of Limited Partner (LP) overlap in SBOs and finds that despite the appearance of additional transaction costs for LPs on both sides of the deal, this is not the…Read the postAI generated — On Secondary Buyouts

AI Summary: The text is an excerpt from a PDF book titled “Fundamentals of Company Valuation” and aims to provide an overview of various valuation techniques. The text starts by explaining fundamental financial concepts like debt, equity, compounding and rate of return. It then progresses to introduce the concepts of no arbitrage and net present value (NPV). The text further explains how leverage and rate of return are not related in a functioning market. Finally, the text discusses financial ratios and their application in company valuation, specifically using the examples of LVMH and Samsung. It then outlines the principles of…Read the postAI generated — Fundamentals of Valuation

AI Summary The provided text is a case study from the Saïd Business School at Oxford University, exploring the redevelopment of the Spofford Juvenile Detention Center in the Bronx, New York. The case focuses on the negotiation between Eric Clement, a finance expert working for the New York City Economic Development Corporation (NYCEDC), and a consortium of developers who were awarded the contract for the project. The case study examines the challenges and opportunities of using financial acumen to achieve social impact through a mixed-use affordable housing development project. It highlights the tension between seeking commercial returns and ensuring the…Read the postAI Generated — Spofford case study

Based on Venture Capitalists and Employee Satisfaction, a recent working paper By Marie Lambert Ludovic Phalippou Alexandre Scivoletto Summary (AI generated) This paper uses employee reviews from Glassdoor to investigate the impact of venture capitalists (VCs) and private equity (PE) on employee satisfaction. The authors find that VC-backed companies have significantly higher employee satisfaction, with employees citing a supportive culture, growth environment, and positive hiring processes as key advantages. However, they also complain more about compensation and challenging work environments. When VCs exit, employee satisfaction drops and becomes more similar to non-VC-backed companies, but some of the initial differences persist.…Read the postAI generated — Venture Capitalists and Employee Satisfaction

“Capital Commitment” Summary (also generated by AI): Summary The article examines the effects of capital commitment requirements in private equity funds on investor portfolios and welfare. The authors propose a dynamic portfolio allocation model to analyse the impact of these requirements, specifically focusing on the costs associated with commitment timing and quantity risks. The study finds that commitment quantity risk, where investors cannot adjust their allocation at the time of capital call, is the most significant friction. This results in under-allocation to private equity, as investors fear being locked into suboptimal positions due to fluctuations in liquid wealth. The article further…Read the postAI generated podcast

Discussion with Simon Clark — Talking about his upcoming book on what is the alleged biggest fraud in private equity of all times, and coming from the inventor of impact investing, rather ironic…. This is the first public discussion of the book, which will no doubt become an iconic movie. Meanwhile, we learn a lot about the private equity industry and what needs to be done to ensure its sustainability when reading this superbly well-documented account of this big moment in PE young life. Book is available on Amazon (et al.). Here is the link for Amazon UK and US

Discussion with Joseph Mate — Talking about the nascent yet ancient private debt market in Africa.

Discussion with Eamon Devlin — Talking about the increasing involvement of private equity in football. This is an extract of a video call — with the full video available on youtube here.

Discussion with Vindi Banga — Talking about value-add in private equity with a focus on what was done by PE firms during the Covid-19 crisis to help their portfolio companies, the role of operating partners and a bit of ESG. This is a double session.

Discussion with Blair Jacobson — Talking about private debt in the US, where it started pre-2008, and how it expanded to the rest of the world including Asia recently. Transcript available here.

Discussion with Tait Simpson — Talking about the Investor Relation function in PE firms.

Discussion with myself — talking about performance of Private Equity funds

Discussion with James Ranger — Talking about how bankers had to re-invent themselves and learn to co-exist with shadow bankers (private debt) in the world of leverage finance.

Discussion with Delilah Rothenberg — Talking about ESG in PE Interact with the Podcast to Learn More

Discussion with Cassandra Rivilla Lutterkort and Eric Capp — Talking about the red hot private debt market, with a focus on the situation in the UK and Europe. Interact with the Podcast to Learn More

Discussion with Aunnie Power Patton — Talking about her forthcoming book ‘Adventure Finance’ in which she describes how small businesses can access finance even when they do not fit the venture capital boxes and mindset. Interact with the Podcast to Learn More

Discussion with Gail Mcmanus — Talking about how to get a job in private equity and actually telling you one big secret — why most applicants do not get the job even though they can do the job!! Now you know! Interact with the Podcast to Learn More