This thesis examines determinants of two variables important in evaluating private equity investments. First of them is the price of companies acquired by private equity funds expressed as a multiple of a profit indicator and the impact of primary and secondary buyouts. The second variable researched is the internal rate of return, a popular tool to measure profitability of private equity funds. The internal rate of return is studied for different groups of private equity funds and is reflected in a post-crisis perspective. The first conclusion stemming from the research is that the profit multiples in secondary buyouts are estimated to be higher compared to primary buyouts. The second conclusion proves the underperformance of real estate funds and the outperformance of distressed debt, turnaround and secondaries funds.

The first essay examines the joint determination of the contract for a private equity (PE) fund manager and the equilibrium risk premium of the PE fund. My model relies on two realistic features of PE funds. First, I model agency frictions between PE fund's investors and manager. Second, I model the illiquidity of PE fund investments. To alleviate agency frictions, compensation to the manager becomes sensitive to the PE fund performance, which makes investors excessively hold the PE fund to hedge the manager's fees. This induces a negative effect on the risk premium in equilibrium. For the second feature, I add search frictions in the secondary market for PE fund's shares. PE fund returns also contain a positive illiquidity premium since investors internalize the possibility of holding sub-optimal positions in the PE fund. Thus, my model delivers a plausible explanation for the inconclusive findings of the empirical literature regarding PE funds' performance. Agency conflicts deliver a lower risk-adjusted performance of PE funds, while illiquidity risk can raise it. In the second essay, coauthored with Andrew Ang and Pierre Collin-Dufresne, we investigate how often investors should adjust asset class allocation targets when returns are predictable and updating allocation targets is costly. We compute optimal tactical asset allocation (TAA) policies over equities and bonds. By varying how often the weights are reset, we estimate the utility costs of different frequencies of TAA decisions relative to the continuous optimal Merton (1971) policy. We find that the utility cost of infrequent switching is minimized when the investor updates the target portfolio weights annually. Tactical tilts taking advantage of predictable stock returns generate approximately twice as much value as those market-timing bond returns. In the third essay, also coauthored with Andrew Ang and Pierre Collin-Dufresne, we revisit the question of a pension sponsor's optimal asset allocation in the presence of a downside constraint and the possibility for the pension sponsor to contribute money to the pension plan. We analyze the joint problem of optimal investing and contribution decisions, when there is disutility associated with contributions. Interestingly, we find that the optimal portfolio decision often looks like a ``risky gambling" strategy where the pension sponsor increases the pension plan's allocation to risky assets in bad states. This is very different from the traditional prediction, where in economy downturns the pension sponsor should fully switch to the risk-free portfolio. Our solution method involves a separation of the pension sponsor's problem into a utility maximization problem and a disutility minimization one.

This research aims to identify the determinants of the ex-ante risk premium required by Italian private equity funds (PEFs) when valuing privately-held target companies. In theory, perceived risk is a key driver of expected returns and anticipated value, but: "Although PE (private equity) has experienced rapid growth, the risk and return profile of this asset class is not well understood." (Jegadeesh et al., 2009). Some papers have attempted to assess the ex post returns pioneered by Lerner & Gompers (1997). Yet such studies reveal both contradictory conclusions and hitherto inexplicable phenomena: what some authors call the 'private equity premium puzzle' (Moskowitz & Jorgensen, 2000). Such contradictory conclusions include a wide spread of abnormal realized returns ranging from -6% (Phalippou & Gottschalg, 2009) to +32% (Cochrane, 2005). In this research, the perceived risk and expected return drivers refer not to the ex-post realized return that PEF investors actually achieve, but to the required return the PEF hopes to gain from the target investment. At this stage, two important indicators adopted in PEF parlance have to be differentiated: (i) the Expected IRR (E.IRR) and (ii) the Threshold IRR (T.IRR). The first is the IRR as an output of a business plan, and the second assesses the return expected by PEFs according to the risk perceived in the business plan. Put simply, these are respectively, the anticipated return and the (risk-adjusted) required return. The study of the T.IRR is one of the main contributions of this thesis since it has never been studied before by academia as an indicator of the ex-ante perceived risk of a PEF target company. This is partly due to two important reasons. First, most previous papers examine ex-post performance, and only a few (e.g. Manigart et al., 2002), try to assess return expectations and risk perceptions using an ex-ante perspective. Second, most of the prior studies are quantitative and try to measure statistical effects captured by the ex-post IRR. By studying 26 deals (in 13 Italian PEFs) in detail (qualitatively and quantitatively), this research project has been able to observe how PEFs assess risk and estimate the T.IRR. The research project reveals that PEFs apply neither rational-based models nor explicit formulae to assess risk exante. By observing a set of phenomena unique to the PEF sector (fees effect, investment speed effect, persistence effect, money-chasing deal phenomenon, illiquidity effect, etc) whose existence has been suggested by many recent papers, this thesis has been able to propose an adjusted version of the three-factor model of Fama and French (1993, 1995) to assess risk. The application of a quasi-rational-based asset pricing model to guide PEFs assessments is also an important contribution of this thesis. In fact, Franzoni, Nowak and Phalippou (2010), claim to be the first to calculate the PEFs' cost of capital by applying asset pricing models. However, their approaches are not only based on the observations of realized returns, but also consider only one additional factor to the standard Fama & French three-factor model (1993), the liquidity factor. In contrast, the results and the model proposed by this thesis are based on qualitative and quantitative ex-ante information and include not only the classical factors of that model, but also some other factors intended to explain some of the phenomena listed above which might also drive the risk premium in private equity funds. Based, therefore, on explaining the behavior of PEFs, the research develops a framework that can be applied by Italian PEFs and perhaps other PEFs in a more rational manner than their past behavior suggests.

The diploma thesis is divided in two main parts. In the first part the thesis describes the concept of venture capital, it provides venture capital concept definition and clarifies possibilities of utilisation of venture capital. The work shows creating funds, gives definition of a founder, funds rules and their priorities, ways of checking investments and the process of the final phase, i.e. evaluation. Kind of venture capital investment, investment process length, quantity of provided tools and investment risk are very important points in this dissertation, too. The second part of the thesis tries to find out more on venture capital funds, which are regular members of CVCA, i.e. Argus Capital Group Limited, Genesis Capital, KBC Private Equity, Enterprise Investors, Advent International and 3TS Capital Partners.

This research aims to identify the determinants of the ex-ante risk premium required by Italian private equity funds (PEFs) when valuing privately-held target companies. In theory, perceived risk is a key driver of expected returns and anticipated value, but: ¿Although PE (private equity) has experienced rapid growth, the risk and return profile of this asset class is not well understood.¿ (Jegadeesh et al., 2009). Some papers have attempted to assess the ex post returns pioneered by Lerner & Gompers (1997). Yet such studies reveal both contradictory conclusions and hitherto inexplicable phenomena: what some authors call the ¿private equity premium puzzle¿ (Moskowitz & Jorgensen, 2000). Such contradictory conclusions include a wide spread of abnormal realized returns ranging from -6% (Phalippou & Gottschalg, 2009) to +32% (Cochrane, 2005). In this research, the perceived risk and expected return drivers refer not to the ex-post realized return that PEF investors actually achieve, but to the required return the PEF hopes to gain from the target investment. At this stage, two important indicators adopted in PEF parlance have to be differentiated: (i) the Expected IRR (E.IRR) and (ii) the Threshold IRR (T.IRR). The first is the IRR as an output of a business plan, and the second assesses the return expected by PEFs according to the risk perceived in the business plan. Put simply, these are respectively, the anticipated return and the (risk-adjusted) required return. The study of the T.IRR is one of the main contributions of this thesis since it has never been studied before by academia as an indicator of the ex-ante perceived risk of a PEF target company. This is partly due to two important reasons. First, most previous papers examine ex-post performance, and only a few (e.g. Manigart et al., 2002), try to assess return expectations and risk perceptions using an ex-ante perspective. Second, most of the prior studies are quantitative and try to measure statistical effects captured by the ex-post IRR. By studying 26 deals (in 13 Italian PEFs) in detail (qualitatively and quantitatively), this research project has been able to observe how PEFs assess risk and estimate the T.IRR. The research project reveals that PEFs apply neither rational-based models nor explicit formulae to assess risk exante. By observing a set of phenomena unique to the PEF sector (fees effect, investment speed effect, persistence effect, money-chasing deal phenomenon, illiquidity effect, etc) whose existence has been suggested by many recent papers, this thesis has been able to propose an adjusted version of the three-factor model of Fama and French (1993, 1995) to assess risk. The application of a quasi-rational-based asset pricing model to guide PEFs assessments is also an important contribution of this thesis. In fact, Franzoni, Nowak and Phalippou (2010), claim to be the first to calculate the PEFs¿ cost of capital by applying asset pricing models. However, their approaches are not only based on the observations of realized returns, but also consider only one additional factor to the standard Fama & French three-factor model (1993), the liquidity factor. In contrast, the results and the model proposed by this thesis are based on qualitative and quantitative ex-ante information and include not only the classical factors of that model, but also some other factors intended to explain some of the phenomena listed above which might also drive the risk premium in private equity funds. Based, therefore, on explaining the behavior of PEFs, the research develops a framework that can be applied by Italian PEFs and perhaps other PEFs in a more rational manner than their past behavior suggests.

Employment, economic growth and self-reliance are the appetites of every country. Small enterprise development is seen as an effective solution towards this goal depending on the availability of resources. Private equity finance is one of the key resources to enterprise development in a country. International case studies have shown that private equity finance can lead to enterprise development in a country. The aim of the study is to determine the contribution of private equity finance to enterprise development in South Africa. In order to get views from other role players in the private equity finance market, questionnaires were distributed to 200 private equity finance players and the response rate was 39%. The sample size comprised 61.5% males and 38.5% females. The majority of the participants were in the age group 25–34 and constituted 53% of the respondents, whilst those aged 35–49 years constituted 35.9%. A smaller number of respondents were in the age group 18–24 and 50 and above, which both comprised 11.5% as an aggregate. The results revealed that there is a positive correlation between enterprise development and private equity capital with 83% of the respondents agreeing and strongly agreeing that the business skills and expertise brought by private equity investors increase business performance. Of the respondents, 74.4% strongly agree and agree with the notion that most Small and Medium Enterprises do need the intervention of private equity investors. It is recommended that the government, through relevant legislation, needs to promote and encourage private equity investment. Some form of private equity investment such as angel investment needs to be formalized, as is available in other countries such as the United States of America and some countries in Europe. / MBA. University of KwaZulu-Natal, Durban 2010.

本研究以2007年「凱雷私募股權基金入主大眾銀行」一案當作研究主軸，以個案方式來呈現私募股權基金入主案的整個事件過程。大眾銀行財務體質不佳，急需資金，最終在眾多的籌資方式中選擇透過私募現金增資發行新股及可轉換公司債，引進單一策略投資人，轉換後外資持股比率最高大幅攀升至30%以上。 以事件研究法衡量股東財富的短期績效，研究發現在宣告日當天，市場對凱雷集團入主大眾銀行的訊息給予正面的回應，而自宣告日前10天至宣告日後8天，有顯著的平均累積異常報酬率。本研究亦衡量股東財富的長期績效，研究結果顯示， BHAR的衡量方法顯示，買進持有至第28個月及第36個月達10%之顯著水準，私募股權基金入主後有部份顯著增加股東財富。 凱雷集團透過持有多數股權，成為大眾銀行的最大股東，並進駐董事會，拿下半數董監席次，成功取得經營控制權，引進專業投資人的資金挹注來打銷呆帳及國際級的專業經驗、併購投資建議、改善公司治理等方式來強化金融業者的營運體質，使大眾銀行的信用評等得以被調升，有助於增加未來的融資彈性。本研究發現凱雷集團以增設獨立董事、縮小董事會規模及提高股權集中度來改善公司治理，與過去文獻研究結果一致，不過大眾銀行在經營效率性指標並未獲得改善。最後，分析大眾銀行入主前後3年經營績效的變化，研究發現凱雷集團入主後，大眾銀行在資本適足性、資產品質和獲利性指標等經營績效指標都有獲得顯著的改善。 / In this study, using the case of “Carlyle Group took over the Ta Chong Bank in 2007” to understand how did private equity funds implement. Due to the poor financial structure, Ta Chong Bank eventually selected through private placements to issuance the new shares and convertible bonds in a number of financing ways. Ta Chong Bank decided to find a single strategic investor, so the highest rate of foreign investor ownership after conversion could significantly increase to about 30%. To measure the shareholder’s wealth, this paper divided the short-term and long-term to analysis. First part, the capital market gave a positive response for the announcement of Carlyle Group took over the Ta Chong Bank. There was a significant average cumulative abnormal return between the ex-announcement and 8 days after announcement. In the long-term, the method of BHAR shows that buy-and-hold to 28 months and 36 months could get abnormal returns at 10% significant level. It presents that this case could increase the shareholder’s wealth in some specific periods. In this case, we find that Carlyle Group became the largest shareholder of Ta Chong Bank through acquiring majority equity. Moreover, Carlyle Group obtained the half numbers of directors, and successfully won the right of operational control. Through the international investment skills and professional operating experience, Carlyle Group improves corporate governance and financial structure of Ta Chong Bank and let the credit rating raised. This study also finds that Carlyle Group sets up independent directors, reduces board size and increases the concentration of ownership to improve corporate governance. It consists with the previous literature. But the operating efficiency indicator doesn’t improve so far. Finally, this study measures the change of operating performance. We find that just the operating performance indicators of capital adequacy, asset quality and profitability have improvement significantly.

LAMACZ, L. Private equity funds. Brno: Mendel University in Brno. 2014 The subject of this diploma thesis is investing through Private equity funds. Based on the research of factors that affect the profitability of private equity funds, the author has drawn up an investment recommendation. The research subject is relation between profitability and the denominated currency of the fund, Morningstar rating, the level of market capitalization, dividend yield and domicile of the fund. In diploma thesis, the author also compares the profitability of investments in the sector and regionally focused private equity funds with profitability of investments in stock indexes focused on the same sectors and regions. The thesis also offers an analysis of supply of private equity funds in the US market and analysis of the impact of financial crises that began in the fall of 2007 on the profitability of private equity funds. The final part is devoted to the presentation of the results attained and their discussion with other authors' similar themes.

A presente dissertação tem por escopo traçar os contornos do regime de responsabilidade do cotista de fundo de investimento em participações FIP. Para tanto, serão analisados os aspectos históricos, a natureza jurídica e a forma como os fundos de investimento são estruturados no direito brasileiro, com foco no fundo de investimento em participações. Tendo em vista que o FIP pode assumir posição de controlador de companhia na qual realiza investimento,a dissertação também trata, de forma sucinta, da estrutura do poder de controle, da identificação do acionista controlador e das hipóteses de sua responsabilização. Na sequência, são apontadas as hipóteses de responsabilização direta e indireta dos cotistas de fundos de investimento em participações. A pesquisa busca demonstrar que o cotista do FIP, em razão da responsabilidade subsidiária decorrente da obrigação de arcar com o patrimônio negativo do fundo, está sujeito a responsabilidade indireta incompatível com o seu papel de investidor. Por fim, aponta-se uma possível solução para o problema da responsabilidade do cotista do FIP. / The scope of this thesis is to describe the outlines of the quotaholders liability on a Fundo de Investimento em Participações FIP (Brazilian Private Equity Fund). Therefore, will be analyzed the historical aspects, legal nature and the way investment funds are structured in the Brazilian law, focusing on the Fundo de Investimento em Participações. Considering the fact that the FIP can fulfill the position controlling shareholder on invested companies, this dissertation also approaches, succinctly, the control power structure, the controlling shareholders identification and the hypothesis of its liability. In sequence, the hypothesis of quotaholders direct and indirect liability on Fundo de Investimento em Participações are appointed. The research pursuits to demonstrate that the FIP quotaholder, due to the subsidiary liability arising from the obligation to bear the negative net equity of the fund, is susceptible to an indirect liability, incompatible with its role as a mere investor. Finally, a possible solution to the problem of the FIP quotaholder liability is presented.

Europos Sąjungoje bei daugelyje kitų valstybių, rizikos ir privataus kapitalo fondai (toliau RPKF) yra svarbus įrankis skatinant inovacijų diegimą įmonėse, darbo vietų kūrimą, pelningumo ir kitų įmonių finansinių rodiklių gerėjimą, kitaip sakant – ekonomikos augimą. Todėl tokio tipo investicijų augimas ypač pasižymi besivystančiose Rytų ir Vidurio Europos šalyse, tuo tarpu Lietuvoje RPKF paplitimas, jų sukuriama pridėtinė vertė ekonomikoje bei veiklos vystymosi galimybės yra labai mažos lyginant su kitomis šalimis, kurios pagal ekonominius rodiklius yra panašaus išsivystymo lygio. Šio darbo tikslas yra išanalizuoti bei įvertinti pagrindinius RPKF kūrimąsi ir veiklą lemiančius aplinkos veiksnius Lietuvoje bei pateikti rekomendacijas ir nuomonę, kokie žingsniai turėtų būti atlikti, siekiant vystyti rizikos ir privataus kapitalo sektorių Lietuvoje. Darbe yra nagrinėjami teoriniai rizikos ir privataus kapitalo fondų finansavimo aspektai, pagrindiniai veiklos principai bei struktūra, nustatomi investicijų vertės k��rimo būdai bei pateikiamos pagrindinės teorinės prielaidos tokiems fondams atsirasti. Apžvelgiami rizikos ir privataus kapitalo įtakos ekonomikos augimui empiriniai tyrimai, pats sektorius bei situacija Europoje ir Lietuvoje. Plačiau tiriami aplinkos veiksniai, įtakojantys rizikos ir privataus kapitalo fondų veiklą Lietuvoje, bei pateikiamas jų įvertinimas. Atsakoma į klausimą, ar nagrinėjami veiksniai yra priešiški ar palankūs RPKF kurtis, investuoti ir vystytis... [toliau žr. visą tekstą] / Private equity and venture capital funds (later on PEVCF) are one of the most important tools in innovation stimulation, employment enhancement and profitability creation process. Though this type of investment process is especially growing with importance in developing Central and Eastern European countries, in Lithuania it is rather insignificant despite vast Governmental programs to stimulate innovations in small and medium size corporate sector. The main goal of this paper is to analyze and evaluate main factors that determine establishment and development of PEVCF in Lithuania; to offer suggestions and opinion about what kind of further steps should be done in order to develop private equity and venture capital sector in Lithuania. The paper analyses theoretical aspects of PEVCF financing, main activity principles and structure; main value creation approaches and theoretical assumptions to create such PEVCF are determined; empirical results how PEVCF influence on economy’s performance, PEVCF sector and current situation in Euro region. The paper provides with more detailed analysis of PEVCF activity factors in Lithuania and evaluates their importance, answers the question, if these factors are positively or negatively correlated with PEVCF establishment and development in Lithuania. The paper concludes that main external assumptions of private equity and venture capital funds performance in Lithuania are positively correlated. Main recommendations how to improve... [to full text]