{"product_id":"beyond-the-j-curve-isbn-9780470011980","title":"Beyond the J Curve","description":"In recent times, venture capital and private equity funds have become household names, but so far little has been written for the investors in such funds, the so-called limited partners. There is far more to the management of a portfolio of venture capital and private equity funds than usually perceived. \u003ci\u003eBeyond the J Curve\u003c\/i\u003e describes an innovative toolset for such limited partners to design and manage portfolios tailored to the dynamics of this market place, going far beyond the typical and often-simplistic recipe to 'go for top quartile funds'.  \u003cp\u003e\u003ci\u003eBeyond the J Curve\u003c\/i\u003e provides the answers to key questions, including:\u003c\/p\u003e \u003cul\u003e \u003cli\u003eWhy 'top-quartile' promises should be taken with a huge pinch of salt and what it takes to select superior fund managers?\u003c\/li\u003e \u003cli\u003eWhat do limited partners need to consider when designing and managing portfolios?\u003c\/li\u003e \u003cli\u003eHow one can determine the funds' economic value to help addressing the questions of 'fair value' under IAS 39 and 'risk' under Basel II or Solvency II?\u003c\/li\u003e \u003cli\u003eWhy is monitoring important, and how does a limited partner manage his portfolio?\u003c\/li\u003e \u003cli\u003eHow the portfolio's returns can be improved through proper liquidity management and what to consider when over-committing?\u003c\/li\u003e \u003cli\u003eAnd, why uncertainty rather than risk is an issue and how a limited partner can address and benefit from the fast changing private equity environment?\u003c\/li\u003e \u003c\/ul\u003e \u003cp\u003e\u003ci\u003eBeyond the J Curve\u003c\/i\u003e takes the practitioner's view and offers private equity and venture capital professionals a comprehensive guide making high return targets more realistic and sustainable. This book is a must have for all parties involved in this market, as well as academic and students.\u003c\/p\u003e \u003cp\u003eList of Boxes xv\u003c\/p\u003e \u003cp\u003eAcknowledgements xvii\u003c\/p\u003e \u003cp\u003eDisclaimer xviii\u003c\/p\u003e \u003cp\u003e\u003cb\u003ePart I Private Equity Environment 1\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e\u003cb\u003e1 Introduction 3\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e1.1 Routes into private equity 3\u003c\/p\u003e \u003cp\u003e1.2 The limited partner's viewpoint 4\u003c\/p\u003e \u003cp\u003e1.3 The challenge of venture capital fund valuation 4\u003c\/p\u003e \u003cp\u003e1.4 Hard figures or gut instinct? 5\u003c\/p\u003e \u003cp\u003e1.5 Managing with fuzzy figures 5\u003c\/p\u003e \u003cp\u003e1.6 Making the grades 5\u003c\/p\u003e \u003cp\u003e1.7 Outline 7\u003c\/p\u003e \u003cp\u003e\u003cb\u003e2 Private Equity Market 9\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e2.1 Funds as intermediaries 10\u003c\/p\u003e \u003cp\u003e2.2 The problem of predicting success 15\u003c\/p\u003e \u003cp\u003e2.3 Broad segmentation of investment universe 18\u003c\/p\u003e \u003cp\u003e2.4 Private equity market dynamics 22\u003c\/p\u003e \u003cp\u003e2.5 Conclusion 26\u003c\/p\u003e \u003cp\u003e\u003cb\u003e3 Private Equity Fund Structure 27\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e3.1 Key features 29\u003c\/p\u003e \u003cp\u003e3.2 Conflicts of interest 38\u003c\/p\u003e \u003cp\u003e3.3 Finding the balance 38\u003c\/p\u003e \u003cp\u003e\u003cb\u003e4 Buyout and Venture Capital Fund Differences 41\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e4.1 Valuation 43\u003c\/p\u003e \u003cp\u003e4.2 Business model 44\u003c\/p\u003e \u003cp\u003e4.3 Deal structuring 45\u003c\/p\u003e \u003cp\u003e4.4 Role of general partners 45\u003c\/p\u003e \u003cp\u003e\u003cb\u003e5 Funds-of-funds 47\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e5.1 Structure 47\u003c\/p\u003e \u003cp\u003e5.2 Value added 48\u003c\/p\u003e \u003cp\u003e5.3 Costs 51\u003c\/p\u003e \u003cp\u003e5.4 Private equity investment programme 52\u003c\/p\u003e \u003cp\u003e\u003cb\u003ePart II Investment Process 57\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e\u003cb\u003e6 Investment Process 59\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e6.1 Key performance drivers 59\u003c\/p\u003e \u003cp\u003e6.2 Process description 61\u003c\/p\u003e \u003cp\u003e6.3 Risk management 65\u003c\/p\u003e \u003cp\u003e6.4 Tackling uncertainty 68\u003c\/p\u003e \u003cp\u003e\u003cb\u003e7 Risk Framework 73\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e7.1 Market value 75\u003c\/p\u003e \u003cp\u003e7.2 Market or credit risk? 77\u003c\/p\u003e \u003cp\u003e7.3 Conclusion 78\u003c\/p\u003e \u003cp\u003e\u003cb\u003e8 Portfolio Design 81\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e8.1 Portfolio design framework 81\u003c\/p\u003e \u003cp\u003e8.2 Portfolio construction techniques 83\u003c\/p\u003e \u003cp\u003e8.3 Risk–return management approaches 88\u003c\/p\u003e \u003cp\u003e\u003cb\u003e9 Case Study 95\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e9.1 Looking for the optimal programme size 95\u003c\/p\u003e \u003cp\u003e9.2 Overcoming entry barriers: long-term strategies 104\u003c\/p\u003e \u003cp\u003e\u003cb\u003e10 The Management of Liquidity 115\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e10.1 Liquidity management problem 115\u003c\/p\u003e \u003cp\u003e10.2 Liquidity management approaches 123\u003c\/p\u003e \u003cp\u003e10.3 Investment strategies for undrawn capital 130\u003c\/p\u003e \u003cp\u003e10.4 Cash flow projections 133\u003c\/p\u003e \u003cp\u003e10.5 Conclusion 145\u003c\/p\u003e \u003cp\u003e\u003cb\u003ePart III Design Tools 151\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e\u003cb\u003e11 Established Approaches to Fund Valuation 153\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e11.1 Bottom-up approach to private equity fund valuation 154\u003c\/p\u003e \u003cp\u003e11.2 Inconsistency of valuations 157\u003c\/p\u003e \u003cp\u003e11.3 NAVs do not tell the full picture 157\u003c\/p\u003e \u003cp\u003e11.4 Portfolio companies cannot be valued in isolation 159\u003c\/p\u003e \u003cp\u003e11.5 Conclusion 162\u003c\/p\u003e \u003cp\u003e\u003cb\u003e12 Benchmarking 165\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e12.1 Specific issues 165\u003c\/p\u003e \u003cp\u003e12.2 Individual funds 166\u003c\/p\u003e \u003cp\u003e12.3 Portfolio of funds 170\u003c\/p\u003e \u003cp\u003e\u003cb\u003e13 A Prototype Internal Grading System 173\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e13.1 Grading of private equity funds 173\u003c\/p\u003e \u003cp\u003e13.2 The NAV is not enough 174\u003c\/p\u003e \u003cp\u003e13.3 Existing approaches 176\u003c\/p\u003e \u003cp\u003e13.4 New approach to internal fund-grading system 180\u003c\/p\u003e \u003cp\u003e13.5 Summary—NAV- and grading-based valuation 188\u003c\/p\u003e \u003cp\u003e13.6 Conclusion 189\u003c\/p\u003e \u003cp\u003e\u003cb\u003e14 Fund Manager Selection Process 193\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e14.1 Relevance of fund manager selection 193\u003c\/p\u003e \u003cp\u003e14.2 Why due diligence? 194\u003c\/p\u003e \u003cp\u003e14.3 The due diligence process 195\u003c\/p\u003e \u003cp\u003e14.4 Fund manager selection process 197\u003c\/p\u003e \u003cp\u003e14.5 Decision and commitment 201\u003c\/p\u003e \u003cp\u003e\u003cb\u003e15 Qualitative Fund Scoring 219\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e15.1 Scoring approach 219\u003c\/p\u003e \u003cp\u003e15.2 Scoring dimensions 221\u003c\/p\u003e \u003cp\u003e\u003cb\u003e16 Grading-based Economic Model 233\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e16.1 Approach 233\u003c\/p\u003e \u003cp\u003e16.2 Internal age adjustment 237\u003c\/p\u003e \u003cp\u003e16.3 Private equity fund IRR projections 238\u003c\/p\u003e \u003cp\u003e16.4 Expected portfolio returns 239\u003c\/p\u003e \u003cp\u003e16.5 Discussion 241\u003c\/p\u003e \u003cp\u003e16.6 Conclusion 242\u003c\/p\u003e \u003cp\u003e\u003cb\u003e17 Private Equity Fund Discount Rate 253\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e17.1 The capital asset pricing model 253\u003c\/p\u003e \u003cp\u003e17.2 Private equity fund betas 257\u003c\/p\u003e \u003cp\u003e17.3 The alternatives to the capital asset pricing model 264\u003c\/p\u003e \u003cp\u003e17.4 Summary and conclusion 266\u003c\/p\u003e \u003cp\u003e\u003cb\u003ePart IV Management Tools 269\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e\u003cb\u003e18 Monitoring 271\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e18.1 Approach to monitoring 272\u003c\/p\u003e \u003cp\u003e18.2 The monitoring objectives 273\u003c\/p\u003e \u003cp\u003e18.3 Information gathering 276\u003c\/p\u003e \u003cp\u003e18.4 Evaluation 282\u003c\/p\u003e \u003cp\u003e18.5 Actions 285\u003c\/p\u003e \u003cp\u003e\u003cb\u003e19 Case Study: Saving Your Investments—Approaches to Restructuring 287\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e19.1 The valley of tears 288\u003c\/p\u003e \u003cp\u003e19.2 The report to the board 289\u003c\/p\u003e \u003cp\u003e19.3 The terms of the restructuring 291\u003c\/p\u003e \u003cp\u003e19.4 Epilogue 293\u003c\/p\u003e \u003cp\u003e\u003cb\u003e20 Secondary Transactions 297\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e20.1 Sellers and their motivations 297\u003c\/p\u003e \u003cp\u003e20.2 Buyers and their motivations 299\u003c\/p\u003e \u003cp\u003e20.3 Secondary market prices 300\u003c\/p\u003e \u003cp\u003e20.4 Transactional issues 307\u003c\/p\u003e \u003cp\u003e20.5 The fund manager perspective 308\u003c\/p\u003e \u003cp\u003e\u003cb\u003ePart V Embracing Uncertainty 311\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e\u003cb\u003e21 Deviating from Top Funds 313\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e21.1 Strategic investments 313\u003c\/p\u003e \u003cp\u003e21.2 Policy objectives 314\u003c\/p\u003e \u003cp\u003e\u003cb\u003e22 Real Options 319\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e22.1 Real options in private equity 319\u003c\/p\u003e \u003cp\u003e22.2 Real option analysis 321\u003c\/p\u003e \u003cp\u003e22.3 An expanded strategy and decision framework 322\u003c\/p\u003e \u003cp\u003e\u003cb\u003e23 Beyond the J-curve 327\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e23.1 Some do it better 327\u003c\/p\u003e \u003cp\u003e23.2 Deadly sins 327\u003c\/p\u003e \u003cp\u003e23.3 Structure instead of \"gut instinct\" 328\u003c\/p\u003e \u003cp\u003e23.4 Patience is a virtue 328\u003c\/p\u003e \u003cp\u003e23.5 Turning water into wine 329\u003c\/p\u003e \u003cp\u003eGlossary 331\u003c\/p\u003e \u003cp\u003eBibliography 341\u003c\/p\u003e \u003cp\u003eAbbreviations 351\u003c\/p\u003e \u003cp\u003eIndex 353\u003c\/p\u003e \u003cp\u003e \u003c\/p\u003e  \"...highlights why limited partners are bad performers and provides guidance for investments...\" (\u003ci\u003eFinancial Times\u003c\/i\u003e, 1st August 05)  \u003cp\u003e\"...an interesting book on a fascinating subject\" (\u003ci\u003eProfessional Investor\u003c\/i\u003e, Dec\/Jan 05\/06)\u003c\/p\u003e   \u003cp\u003e\u003cb\u003e\u003ci\u003eAbout the authors\u003c\/i\u003e\u003c\/b\u003e  \u003c\/p\u003e\u003cp\u003e\u003cb\u003eDR THOMAS MEYER\u003c\/b\u003e studied computer science at the Bundeswehr Universität in Munich followed by doctoral studies at the University of Trier. He also holds an MBA from the London Business School. After 12 years in the German Air Force he worked for the German insurance group Allianz AG in Corporate Finance and M\u0026amp;A with particular focus on Japan, and as the regional Chief Financial Officer of Allianz Asia Pacific in Singapore.  \u003c\/p\u003e\u003cp\u003eOver the last years Thomas has been responsible for the creation of the European Investment Fund's risk management function. The focus of his work is the development of valuation and risk management models and investment strategies for venture capital fund-of-funds.  \u003c\/p\u003e\u003cp\u003e\u003cb\u003etmeyer.mba33@london.edu\u003c\/b\u003e  \u003c\/p\u003e\u003cp\u003e\u003cb\u003ePIERRE–YVES MATHONET\u003c\/b\u003e holds a Master of Science cum laude in Finance from London Business School and a Master of Science magna cum laude in Management from Solvay Business School, Brussels. He is also a Certified European Financial Analyst.  \u003c\/p\u003e\u003cp\u003eHe worked as an investment banker in the technology groups of Donaldson, Lufkin \u0026amp; Jenrette (DLJ) and Credit Suisse First Boston, and previously, for the audit and consulting departments of PricewaterhouseCoopers.  \u003c\/p\u003e\u003cp\u003eHe is currently heading the venture capital activities within the Risk Management and Monitoring division of the European Investment Fund. \u003c\/p\u003e\u003cp\u003e\u003cb\u003epmathonet.mifft2000@london.edu\u003c\/b\u003e  \u003c\/p\u003e\u003cp\u003eTogether, as risk managers, the authors are responsible for a portfolio of nearly two hundred private equity funds with more than €2.5 billion committed and almost €5 billion under management.    \u003c\/p\u003e\u003cp\u003e'This book goes a long way to filling the vacuum of digestible thought and writing about private equity fund investing. It provides structure and rigour to all aspects of the investment process and will be an invaluable reference for the limited partner community. But more than anything else, it provides a platform on which to build greater understanding as the asset class evolves and the role of fund investors becomes more demanding.'\u003cbr\u003e \u003cb\u003e—Chris Davison,\u003c\/b\u003e Associate Director, Almeida Capital  \u003c\/p\u003e\u003cp\u003e'This is the first work I have seen that comprehensively covers the important subject of valuing, evaluating and measuring the performance of private equity funds. Much has been published on individual aspects of this controversial subject by various segments of the stakeholder universe – usually putting forward partisan viewpoints. This is the first time that a holistic, integrated and disciplined framework has been adopted. The approach taken has yielded a rich crop of useful results including an innovative methodology for determining fair value for private equity funds during the course of their long lives; portfolio design and benchmarking methods; a prototype grading and fund scoring system. Essential reading for investors and a useful state-of-the-art reference manual forprivate equity managers.'\u003cbr\u003e \u003cb\u003e—Christopher K. B. Brotchie,\u003c\/b\u003e Formerly Chief Executive   of the Baring Private Equity Group and Member of   the ING Management Council  \u003c\/p\u003e\u003cp\u003e'Congratulations to both Thomas Meyer and Pierre-Yves Mathonet for their publication \u003ci\u003eBeyond the J Curve\u003c\/i\u003e. They should be highly commended for breaking a long-standing taboo – investing in private equity can now be modelled. \u003ci\u003eBeyond the J Curve\u003c\/i\u003e not only reveals a theoretical approach to Fair Value for private equity funds but also proposes a complete approach for investors to build up a comprehensive and effective programme for private equity investments. I am personally convinced that our industry should become more involved with this type of approach in order to best explain the interest of investing in private equity.'\u003cbr\u003e \u003cb\u003e—Pierre Hervé,\u003c\/b\u003e General Secretary of Natexis Private  Equity, Chairman of AFIC's Basel II and IFRS  working groups, and Member of EFRAG's Venture   Capital working group  \u003c\/p\u003e\u003cp\u003e'\u003ci\u003eBeyond the J Curve\u003c\/i\u003e is a timely guide for investors in private equity, with an elegant balance of analysis and practical suggestions. Its emphasis on monitoring and active portfolio management should promote more effective stewardship of private equity assets in the future.'\u003cbr\u003e \u003cb\u003e—Brenlen Jinkens,\u003c\/b\u003e Director, Cogent Partners Europe     \u003c\/p\u003e\u003cp\u003e\u003cb\u003eBEYOND THE J CURVE\u003c\/b\u003e  \u003c\/p\u003e\u003cp\u003e\u003cb\u003eThomas Meyer \u0026amp; Pierre-Yves Mathonet\u003c\/b\u003e  \u003c\/p\u003e\u003cp\u003eIn recent times, venture capital and private equity funds have become household names, but so far little has been written for the investors in such funds – the socalled 'limited partners'. \u003ci\u003eBeyond the J Curve\u003c\/i\u003e provides an innovative toolset for such limited partners to design and manage portfolios tailored to the dynamics of this market place, going far beyond the typical and often-simplistic recipe to 'go for top quartile funds'.  \u003c\/p\u003e\u003cp\u003e'The authors of \u003ci\u003eBeyond the J Curve\u003c\/i\u003e have taken on the ambitious project of analysing the difficult and controversial area of valuing fund portfolios. Their innovative and integrated approach opens up the framework within which these valuations are practised by investors, and offers alternatives. \u003ci\u003eBeyond the J Curve\u003c\/i\u003e is a thorough and pioneering contribution to the current debate.'\u003cbr\u003e \u003cb\u003e— Javier Echarri,\u003c\/b\u003e Secretary General, European Private Equity \u0026amp; Venture   Capital Association (EVCA)  \u003c\/p\u003e\u003cp\u003e 'In this groundbreaking book, Meyer and Mathonet provide both the theoretical underpinnings for, and practical realities of, building a successful portfolio of private equity investments. It is an invaluable resource for any institutional investor who is constructing or managing a portfolio of investments in private equity and\/or venture capital.'\u003cbr\u003e \u003cb\u003e— Mark D. Wiseman,\u003c\/b\u003e Chairman, Institutional Limited Partners   Association (ILPA)  \u003c\/p\u003e\u003cp\u003e'\u003ci\u003eBeyond the J Curve\u003c\/i\u003e is right on target, giving the private equity investment manager much-needed guidance on how to put private equity into a modern diversified investment portfolio. It provides practical, comprehensive advice on traversing the often risky waters of venture and private equity investing and provides a thorough and advanced introduction. It should become a 'musthave' reference.'\u003cbr\u003e \u003cb\u003e— Jesse E. Reyes,\u003c\/b\u003e Managing Director, Reyes Analytics\u003c\/p\u003e","brand":"Wiley","offers":[{"title":"Default Title","offer_id":47988808450277,"sku":"NP9780470011980","price":120.0,"currency_code":"USD","in_stock":false}],"thumbnail_url":"\/\/cdn.shopify.com\/s\/files\/1\/1842\/7735\/files\/9780470011980.jpg?v=1761781672","url":"https:\/\/k12savings.com\/products\/beyond-the-j-curve-isbn-9780470011980","provider":"K12savings","version":"1.0","type":"link"}