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Private Equity and Emerging Domestic Markets Marcellus Taylor Aldus Equity April 25, 2006

Private Equity and Emerging Domestic Markets Marcellus Taylor Aldus Equity April 25, 2006. Aldus Equity. Aldus Equity is a private equity consulting and fund-of-fund firm with a specialty practice focused on Emerging Private Equity Funds

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Private Equity and Emerging Domestic Markets Marcellus Taylor Aldus Equity April 25, 2006

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  1. Private Equity and Emerging Domestic Markets Marcellus Taylor Aldus Equity April 25, 2006

  2. Aldus Equity • Aldus Equity is a private equity consulting and fund-of-fund firm with a specialty practice focused on Emerging Private Equity Funds • The firm has invested over $350 million into 14 different emerging private equity funds • Aldus manages a $375 million emerging manager program on behalf of New York Common Retirement • The firm has over $2 billion of total assets under management • Key clients include: CalPERS, New York City Retirement, New Mexico, Louisiana State Employees, San Antonio Fire & Police

  3. Emerging Private Equity Market Reaching a Critical Mass Critical Mass of Assets Large Sub-Sectors Significant Players Source: Council of Urban Investors Institute

  4. Pension Funds Investing in Emerging Private Equity Funds Formal Emerging Programs Public Pensions Corporate Pensions

  5. Benefits of Investing In Emerging Private Equity Funds • Access to differentiated deal flow which enhances diversification and reduces total portfolio risk • Emerging funds have proven ability to generate proprietary deal flow • Emerging funds have a stronger sense of alignment with LP’s • Can’t generate wealth through excessive management fees • Typically more motivated and hungry than established firms • Provides opportunity to cultivate long-term relationships with tomorrow’s private equity stars • Ensures strong access to best performing future funds

  6. Why Invest in Emerging Managers? Emerging Managers Have Demonstrated an Ability to Generate Strong Returns • Historically, many of the most successful private equity firms achieved strongest performance investing first or second funds • A recent Kaufman Foundation study revealed that minority private equity firms generated an average IRR of 23.9% Sources: Kauffman Foundation: “Minorities and Venture Capital: A New Wave in American Business”. Kaufman survey of 24 minority-focused firms making investments during the 1989-1995 period. Private Equity Intelligence, Ltd., Fund private placement memos.

  7. How to Evaluate Emerging Private Equity Funds Critical Due Diligence Items • Individual Track Record Analysis • Investment performance at prior firms • Attribution Letters • Extensive reference checks • Team Cohesion and Team Stability • Previous working relationships and shared experiences • Broad ownership across the partnership • Access to Quality Deal Flow • Successful deal sourcing at prior firms • Preliminary deal pipeline report • Comprehensive Investment and Due Diligence Process • Systematic approach to evaluating deals • Sufficient documentation and analysis throughout the process

  8. Keys to Investing in Emerging Private Equity Funds • Emphasis on generating strong returns should never be compromised • Thorough due diligence is critical • Requires a specialized advisor who has experience investing in a diversified pool of Emerging Funds • Investors should maintain a “portfolio” driven approach to investing in Emerging Funds • Diversified across key sub-strategies • Sufficient vintage year diversification

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