Private Equity Success: High Returns in a Risky World

This article will be covering how a private equity firm, despite the firm’s investment preferences, can lessen their risk without negatively affecting the potential gains in their assets and capital by making the right considerations. Investing in platforms such as stocks, bonds, and real estate may offer good long term returns. A small percentage of people look to invest in private equity markets. A reason for this is because funds have high minimum investments which makes private equity more exclusive compared to many public markets. A private equity investment, in most cases, is an opportunity for higher returns, with the cost being that there is more risk involved. This is not always the case as there are stocks that are much more risky, but compared to the typical personal stock portfolio an individual has, private equity is typically seen as being riskier. Within private equity there are ways a firm can set itself up for a better chance at succeeding in the industry. There are considerations and strategies that firms can implement to increase their chances at generating less risk in their investments without negatively impacting their capital returns. These factors include, but are not limited to, the relationships that the firm builds, the decision making process within the firm, and a firm’s ability to analyze the current market. If a private equity firm considers and has a reasonable approach to these components then the firm will be well on its way to achieving the luxuries and success that every firm and investor seeks

how to compare, analyze and decide on potential investments

This paper aims to study the decision-making criteria that weight on the Portuguese Venture Capital firm’s investment decision, as well as to create a framework which may enable the comparison between different projects as what regards their potential given eighteen selected criteria. The framework’s development was supported by previous literature and the collection of primary data, gathered throughut interviews and inquiries conducted with twelve players of the Portuguese Venture Capital industry. In line with the findings of Hisrich and Jankowicz (1990), Kaplan and Strömberg (2000) and Kaplan, Sensoy and Strömberg (2009), this paper confirms the dominant importance for the Portuguese Venture Capital firms of the criteria Management Team and Product and Market Opportunity over the remaining selected criteria, when faced with an investment decision

Private equity challenge - Kompuestos as an investment opportunity in the plastic industry

This Private Equity project studies the benefits for a private equity firm of acquiring Kompuestos, a producer of masterbatches and other plastic compounds, aiming to adapt its business to meet current sustainability concerns and become more sustainable. The investment yields a 3.3x money multiple. Founded in 1986, Kompuestos is a Spanish player benefiting from a large and diversified client base, with annual turnover of € 46.2m and an EBITDA of € 3.3m. The plastics market is expected to reach a value of $ 721bn by 2025, with high growth opportunities coming from new segments including bioplastics and biodegradable solution

PRIVATE EQUITY: ITS ROLE IN PORTFOLIO OPTIMIZATION

Alternative investments have increasingly been used to complement a traditional portfolio of stocks and bonds. Among them, Private Equity is found to be able to provide diversification benefits and higher expected returns. This study uses the traditional mean-variance portfolio optimization process with several inputs: “equilibrium” returns for the traditional assets as a neutral starting point generated by the Black-Litterman model; and a range of expected returns of private equity fund types. We find that private equity funds in earlier stages are more suitable for investors seeking higher expected returns and with higher levels of risk appetite, while private equity in later stages are more suitable for investors with lower risk appetite, seeking for more modest levels of returns. In both cases, it is notable that the portfolio gains efficiency after the inclusion of private equity. The diversification benefits from low correlations are also observed

A blink of Harvard Business School’s program “Certificate of Management Excellence”: - and takeaways for the work of a Chief Compliance Officer in an international environment

The following blink reflects the personal experiences and takeaways made by the author during a selected program at Harvard Business School during March 2022 to August 2022. It is neither intended to pretend, assert, or even assume that similar experiences are not possible in applicable universities or learning institutions at any other place nor is the author financially bonded of either receiving gratuities or benefits of some kind to/from Harvard Business and/or Law School. Therefore, the blink is an aftermath of the specific experience in an extraordinary divers and professional learning environment that has been

Private Equity Market in Recovery

AbstractIn the past three decades there has been an increasing role of Private Equity (PE) industry in the financing of enterprises especially in case of firms that have great growth potential but are in need of external financing. Via providing financing for these enterprises PE can boost economic growth. On the other hand the different subsets of PE like Venture Capital (VC) and Buyout (BO) funds appear as an important investment class and the return characteristics of these asset classes is an indicator of the performance of the whole PE industry. The authors in their earlier works focused on the history of the return characteristics of the funds in the US and in Europe found different trends and features in the two regions with regards to the different asset classes. In this paper the authors focus on the current progress of PE industry in Europe and in the US and examine the recovery of the industry from the recession of 2008. The current trends are consistent with our former findings. In average the returns of BO funds exceeded the returns of VC funds in the US as well as in Europe. Not just according to the absolute value of the returns, but also according to its risk-return tradeoff BO seemed to be a preferable investment. The gap between the performances of BO funds was not as significant as the difference of VC funds. While the recession of 2008 affected negatively the returns of PE, the ‘dotcom’ boom of the millennia had much higher impact on the industry, and our finding is that PE returns are on a recovery course

Working Paper: The Upward Redistribution of Income: Are Rents the Story?

In the years since 1980, there has been a well-documented upward redistribution of income. While there are some differences by methodology and the precise years chosen, the top one percent of households have seen their income share roughly double from 10 percent in 1980 to 20 percent in the second decade of the 21st century. As a result of this upward redistribution, most workers have seen little improvement in living standards from the productivity gains over this period.This paper argues that the bulk of this upward redistribution comes from the growth of rents in the economy in four major areas: patent and copyright protection, the financial sector, the pay of CEOs and other top executives, and protectionist measures that have boosted the pay of doctors and other highly educated professionals. The argument on rents is important because, if correct, it means that there is nothing intrinsic to capitalism that led to this rapid rise in inequality, as for example argued by Thomas Piketty

A venture capitalist’s screening and selection process: how to compare, analyze and decide on potential investments

This paper aims to study the decision-making criteria that weight on the Portuguese Venture Capital firm’s investment decision, as well as to create a framework which may enable the comparison between different projects as what regards their potential given eighteen selected criteria. The framework’s development was supported by previous literature and the collection of primary data, gathered throughut interviews and inquiries conducted with twelve players of the Portuguese Venture Capital industry. In line with the findings of Hisrich and Jankowicz (1990), Kaplan and Strömberg (2000) and Kaplan, Sensoy and Strömberg (2009), this paper confirms the dominant importance for the Portuguese Venture Capital firms of the criteria Management Team and Product and Market Opportunity over the remaining selected criteria, when faced with an investment decision