Fund raising prospectuses (a.k.a. PPMs) are great documents for research (even though I had a very hard time publishing my articles using these data) – it is basically the only way to obtain data on return of individual investments. The alternative is to infer these returns using the accounting information of the portfolio companies. This is not easy. An example of a PPM is available here; with the usual 30% IRR featured prominently (you know, the one that no-one takes seriously in practice). It is difficult to collect a large set as they are confidential documents and people are obsessed with the NDAs.
You can also see a standard fundraising presentation. This one is claiming 50% return and is, obviously, highly oversubscribed.
Similarly, Limited Partnership Agreements (LPAs) have long been as secret as the coca cola recipe. A few LPAs did end up online and have been gathered by a website called naked capitalism and located on the Pennsylvania Treasury’s public e-contracts library.
Many Management Services Agreements (MSAs) are available in SEC documents (but are a bit hard to find) — here is a link to a zipped file that contains many of them. I think it is a very interesting read.
These are the indices derived in the paper ‘Estimating Private Equity Returns from Limited Partner Cash Flows‘
The SEC provides details of its investigations, which may include fund terms such as portfolio company fees and offsets: Apollo, Blackstone, Fenway Partners and WL Ross. Since 2011, the SEC has required investment advisors to prepare brochures detailing their investment services and fee structures. Some private equity firms disclose management fee rebates within these documents, some not.
From 2008, the Los Angeles Fire and Police Pension Fund board meeting minutes mention fund fee rebates for the funds brought forward to the board for investment approval. An example of such a document is available here.
From 2007, all private equity fund investment proposals for the State of New Jersey, Department of the Treasury presented at board meetings are listed online [link here]. You can download the ‘memorandum’, which includes a summary of the key terms and conditions, including the rebate policy for most funds.
Students also often asked me for investment memo. And here is one: in 2005, Roelof Botha from Sequoia wrote an IM to the investment committee (IC) to invest in the seed round of a video company called YouTube. During a 2010 court case of Viacom vs. Youtube (Google) case, Roelof had to disclose his investment memorandum as part of his testimony. Yay!
And more investment memos are available and discussed The most common benchmark in PE, which also includes time-series of returns is provided by CA and are available free of charge on their website.Fund raising prospectuses (a.k.a. PPMs) are great documents for research (even though I had a very hard time publishing my articles using these data) – it is basically the only way to obtain data on return of individual investments. The alternative is to infer these returns using the accounting information of the portfolio companies. This is not easy. An example of a PPM is available here; with the usual 30% IRR featured prominently (you know, the one that no-one takes seriously in practice). It is difficult to collect a large set as they are confidential documents and people are obsessed with the NDAs.
You can also see a standard fundraising presentation. This one is claiming 50% return and is, obviously, highly oversubscribed.
Similarly, Limited Partnership Agreements (LPAs) have long been as secret as the coca cola recipe. A few LPAs did end up online and have been gathered by a website called naked capitalism and located on the Pennsylvania Treasury’s public e-contracts library.
Many Management Services Agreements (MSAs) are available in SEC documents (but are a bit hard to find) — here is a link to a zipped file that contains many of them. I think it is a very interesting read.
These are the indices derived in the paper ‘Estimating Private Equity Returns from Limited Partner Cash Flows‘
The SEC provides details of its investigations, which may include fund terms such as portfolio company fees and offsets: Apollo, Blackstone, Fenway Partners and WL Ross. Since 2011, the SEC has required investment advisors to prepare brochures detailing their investment services and fee structures. Some private equity firms disclose management fee rebates within these documents, some not.
From 2008, the Los Angeles Fire and Police Pension Fund board meeting minutes mention fund fee rebates for the funds brought forward to the board for investment approval. An example of such a document is available here.
From 2007, all private equity fund investment proposals for the State of New Jersey, Department of the Treasury presented at board meetings are listed online [link here]. You can download the ‘memorandum’, which includes a summary of the key terms and conditions, including the rebate policy for most funds.
Students also often asked me for investment memo. And here is one: in 2005, Roelof Botha from Sequoia wrote an IM to the investment committee (IC) to invest in the seed round of a video company called YouTube. During a 2010 court case of Viacom vs. Youtube (Google) case, Roelof had to disclose his investment memorandum as part of his testimony. Yay!
And more investment memos are available and discussed here — although, again, these are mostly early stage.
If my book goes too fast to your liking on corporate finance concepts or you did not take a corporate finance course before, you could check out this book by Ivo Welsh: Corporate Finance. There is some overlap in terms of material with the first part of my book. And this book is free!
But you probably want to read some industry reports that give you an overview of the sector, key trends etc. There are many and you could quickly get lost in all this information. Yet, I recommend going to Bain & co reports, scroll down to their best seller: the Global Private Equity Report — it appears yearly, sometimes in Feb/March. Reading this report once before a course is helpful, I think.
The Preqin academy has a lot of information, is well-organized, and is accessible for beginners. Pitchbook also publishes a lot of information about the private equity industry, including videos. And of course there is plenty on youtube, all kind of introductory videos and wannabe advanced ones. But be careful of not getting lost in the wild and overwhelmed. This website and my books have been designed to avoid these problems.
You may want to subscribe to one of the private equity newsletters before a course to start becoming familiar with the hot topics and the jargon. Daily news on Private Equity are published on www.pehub.com and you can sign up for their free daily newswire, which has information on internships, job postings etc. But there are many others. Check out Private Equity International — which I find extremelly informative.
This New York Times site is as cool as it is accessible — do read it before a course: This Is Your Life, Brought to You by Private Equity. The private equity industry has become hugely influential and the NYT shows how the industry’s influence plays out in your daily life.
Going through these PE cartoons is actually not just entertaining but also useful to quickly see the hot topics facing the industry and their evolution over time — check this out
If you want to go deeper on topics covered in the second part of the book — LP issues — I recommend reading this report on why the Norway sovereign wealth fund should invest in private equity. Reading this report will also show you how most of the facts presented in my book can be spinned in a very different way, how certain topics can receive more or less coverage, etc. It is probably the best read to do in complement to part two of the book.
To go beyond the book and any of my courses, there is again plenty you can check out. The above mentioned websites are good places to go to.
You can also visit industry association websites: America Invest Council, Invest Europe, Latin America, Asia, Africa, British, France Invest … On these websites, there are tons of research reports, case studies… but be mindful that they are a bit more lobbyists than educators. One report I find useful is the Invest Europe’s Professional Standards Handbook, which is a comprehensive piece about PE fund (governance, fundraising, performance presentation)… even though they promote #IRRelevant performance metrics, most of the content is excellent and up to date – ish.
The Investor association ILPA has tons of useful material and tends to be more objective about the industry. There are also a lot of important associations like those working for a more diverse industry, e.g. level20.
If you are interested in secondary markets, there are tons of newsletter just for that. Elm capital has one and also collects news about this market right here. Similarly, for secondaries, you can check secondarylink. Their newsletter also contains job offers in PE!
Similarly, if you are interested in the debt markets, there is tons of specialized material. Here is a selection:
Standard and Poors – A guide to the loan market . This report gives an introduction to the U.S. syndicated loan market: types of syndication, the syndication process, information difficulties, credit risks, the different types of loan facilities, their fees and pricing terms as well as covenants, the rating process of leveraged loans and the criteria guidelines for recovery ratings on speculative-grade debt.
Standard and Poors – High yield bond market primer. This short primer gives a short introduction into the high yield bond segment. It contains information about the issuers and the investors, bond characteristics and covenants as well as registration, offerings, syndication and the secondary market.
Collateralized Loan Obligations – A primer. This paper introduces Asset Securitization and Collateralized Debt Obligations, the different types of CBOs and CLOs, the structuring and tranching of CLOs as well as techniques for internal and external credit enhancement, the different characteristics of synthetic and traditional loan securitization, analytical consequences of securitization, and the effect of securitization on the loan portfolio composition of banks.
