I enjoyed listening to a panel this morning sponsored by Broadgate Consultants on "Raising Fund “x”: Trends in Private Equity Fundraising and Fund Evaluation."  My rough notes follow:

 

Panelists were:

• Dr. Oliver Gottschalg, Assistant Professor of Strategy and Business Policy, HEC School of Management; Co-director, HEC-INSEAD Buyout Research Group
• C. Scott Hamner, Director, Credit Suisse Customized Fund Investment Group
• Jesse E. Reyes, Managing Director, Bear Stearns Private Funds Group; Founder, Reyes Analytics

 

Reyes: Buyout market bifurcated between very large firms and very small.  Everyone now wants to go mid-market (defined as under $1b to under $6b). 

Distributions have been coming back to LPs very slowly, so they have less capital to invest.

 

Hamner We represent pensions and other large investors.  We act as an investor/fiduciary on behalf of those clients, and are an intermediary here. 

 

Quality and volume of funds is much greater now than it was in the past. 

We're seeing a convergence of our investor criteria. 

We have a much larger universe of funds in which we can invest. 

Bar for new manager relationships is higher than managers we've known in the past.

 

Gottschalg: "Top quartile paradox". 

A lot of LPs unhappy with past performance of their investments.

 

Q: Subjective or objective criteria more important?

 

Reyes:  "People eat multiples not IRR."

 

Gottschalg: Multiples and IRRs are both misleading.  A better measure is to move to a better standard on which performance can be objectively reported. 

 

Q: What is your advice to new managers?

 

Reyes: I see a lot of shotgun marketing in the LP business.  You should only be focusing on funds that are a fit for what you invest in/your stage. 

 

The attribution of your track record is important, i.e., who in your fund did what. 

 

The devil you know is better than the devil you don't.

 

Differentiation/knowing your customer is paramount.

 

Q: What is the effect of the growth of the secondaries investing market?

 

Gottschalg: This industry will move to more objective reliable performance measures, a ratings-type model. 

 

A more liquid secondary market opens up a whole new toolbox for how you invest in this sector, and changes how you think about investing in this area.

 

Gottschalg: What are obstacles in the way of this industry realizing the division that you outlined? 

 

Inefficiencies in the market help top PE firms get great returns.

 

Reyes: Is being top quartile in Fund 1 correlated with being top quartile in Fund 2? 

 

Q: How does GPs marking to market impact how you do business?

 

Reyes: 95% correlation between VC returns and Nasdaq; 60% correlation between buyout returns and S&P 500

 

Question from fund that brags about its capital efficiency, and asked for details on metrics that the panel recommends for evaluating fund performance.

 

Reyes: Capital efficiency is not a gating item, it's a differentiator.

 

Teten: What metrics are fairest for judging private equity vs. hedge funds and other investments?

 

Reyes: Some relevant research on this topic by Austin Long, of U. Texas, and Jeremy Collard.

People tend to use just multiples, not IRRs.  "It's hard to compare an IRR with an index."

 

3 elements to consider in designing a performance measure:

- overall multiple

- duration

- risk level you are taking

 

(Teten: I'd also add you should measure how much capital you use immediately vs. later.)

 

Hamner: Two main comparables:

-         a public index (S&P 500, Russell 2000)

-         Cambridge Associates US Venture Capital Index/Thomson Venture Economics index

 

Q: How do you measure performance when PEs take a long time to put capital to work?

 

Reyes: "Just in time" financing is the solution for this, that is a tool to boost IRR to the highest possible level. 

 

 

Events | Private Equity Investing

I’ll be visiting the San Francisco Bay Area May 5-8, and hope that you can attend some of my investor seminars to the Wharton and Columbia Business School Alumni Clubs:

Topic: “Squeezing Blood from a Stone: The Professional Investor’s Guide to Eliciting Information”

Host: Wharton Club of Northern California
Learn how professional investors elicit maximum information in minimum time from industry sources. How do you ask just the right questions to get a CFO to open up and tell you about his company? This training is based on best practices in the intelligence, psychiatric, law enforcement, and journalist communities.
When: Wednesday, May 7th, 6pm cocktails, 7pm program
Location: Perkins Coie, 101 Jefferson Drive, Menlo Park, CA 94025
RSVP and more details: http://www.whartonclub.com/article.html?aid=901

Topic: “Where are the Deals? Venture Capitalists, Hedge Funds, and Private Equity Firms’ Best Practices in Deal Creation and Deal Origination”

Host: Columbia Business School Alumni Club of Northern California
What are you doing to identify companies in which you can successfully invest? Learn about recent research on where institutional investors source their investments; how to identify companies with the earmarks of an attractive opportunity; and how to increase your inflow of worthwhile referrals from both intermediaries and investable companies.
When: Thursday, May 8th, 6pm cocktails, 7pm program
Where: Pagemill Partners Auditorium, 2475 Hanover Street, Palo Alto, CA 94304
RSVP and more details: http://www.acteva.com/booking.cfm?bevaid=158041

Also, I will be attending the Association for Corporate Growth Grow! Awards on Tuesday, May 6, at the Computer History Museum in Mountain View ( https://chapters.acg.org/sv/uploads/events/922FC1DF84A74255B0B429DC3FC81104.pdf ), which may interest many of you.

Events | Private Equity Investing | Public Markets Investing

I'm happy to report that Integrity Research, the leading research firm that analyzes the investment research industry, has named Evalueserve Circle of Experts the 2008 Top Pick as Asia/ Emerging Market Specialist Expert Network.  We've only been part of Evalueserve for one year, so we're very happy to quickly see public recognition for the value that we've created.  One of the rationales for the merger was the opportunity it gave Circle of Experts to quickly gain access to Evalueserve's emerging markets infrastructure, particularly in Asia.

 

I have attached the full press release below.

 

Press Release

 

Integrity Research Names Evalueserve Circle of Experts 2008 Top Pick as Asia/ Emerging Market Specialist Expert Network

 

Evalueserve Circle of Experts has been selected as 2008 Top Pick for Boutique Asia/ Emerging Markets Expert Network Specialist by Integrity Research, one of the most influential firms analyzing the investment research industry. This honor comes one year after the acquisition of the Circle of Experts, formerly known as Nitron Advisors, LLC, by Evalueserve, one of the largest global providers of offshore investment research support services.

 

The Circle of Experts is strong in all industries in the Emerging Markets. We leverage the intellectual capital that Evalueserve has developed in executing over 10,000 projects for over 1,100 clients, including 7 of the top 12 investment banks and 10 of the top 15 strategy consulting firms.

 

Evalueserve has dedicated operations centers in India, China, and Chile and is well-positioned to service clients on these markets. Evalueserve is also setting up a new operations centre in Romania in early 2008, in order to provide local coverage of European markets.

 

Integrity Research evaluated the twenty-five leading expert networks on six different metrics: their ability to source experts, the skill with which they match the appropriate experts with client requests, additional services such as market research or conferences, the firm’s key compliance principles to prevent the misuse of proprietary non-public information, customer satisfaction, and overall network usage.

 

Integrity surveyed hedge funds and long only investors to better understand how they use expert networks, which networks they prefer, and why. The survey helped Integrity Research evaluate each expert network, and also understand the dynamics of the expert network industry itself. You can read a summary of the survey at http://secure.integrity-research.com/imageweb/executivesummary-expertnetworks.pdf and purchase the entire study at http://www.integrity-research.com/retailReport.

 

About Evalueserve

Evalueserve provides custom research and analytics services to companies worldwide including Investment Research, Market Research, Business Research, Data & Financial Analytics, Intellectual Property and Legal Process Services, plus access to a global network of domain experts through Evalueserve Circle of Experts. The firm was founded by IBM and McKinsey alumni, and has completed over 12,000 client engagements. The firm currently has over 2,200 professionals located in research centres in Chile, India, China and New York. Evalueserve’s Client Executives are located in most major business and financial centres globally – from Silicon Valley to Sydney. For more details, visit www.evalueserve.com.

 

About Evalueserve Circle of Experts

Evalueserve Circle of Experts (www.CircleofExperts.com) provides its clients direct access to a global network of frontline industry experts across the Americas, Asia, Europe, and the Middle East. With its focus on emerging markets and dedicated operations centers, Evalueserve Circle of Experts has an unparalleled panel in India and China. The Circle comprises executives, scientists, academics, consultants, and regulatory observers who can deliver fast and precise solutions to client issues through private telephone consultations, customized surveys, and in-person meetings. Evalueserve identifies leading experts across all major industries and presents them to our clients.

 

About Integrity Research

Integrity Research Associates, LLC is an information and solutions provider specializing in the investment research industry. Integrity’s primary clients are institutional investors that use Integrity’s services to find new research providers and monitor existing ones. Integrity’s analysts cover over 1,600 research firms in the U.S., Europe and Asia—research providers that no other source can offer. Integrity Research is the only firm which tracks the entire research industry, including nontraditional research, boutiques and research-related data, software and analytics. Integrity covers primary research firms and other alternative research firms which offer unique investment insights.

mailto:

 

Disclaimer

Although the information contained in this article has been obtained from sources believed to be reliable, the author and Evalueserve disclaim all warranties as to the accuracy, completeness or adequacy of such information. Evalueserve shall have no liability for errors, omissions or inadequacies in the information contained herein or for interpretations thereof.

 

EVSContact

 

India:

PRCC

EVS Media Relations Tel: +91 124 4154000 pr(at)evalueserve.com

 

New York:

David Teten

Tel: +1-212-682-5875

dteten(at)CircleofExperts.com

 

 

Public Markets Investing | Securities Research

I enjoyed presenting a few weeks ago to the Harvard Business School Club of London on "Best Practices in Deal-Sourcing by Private Equity, Venture Capital, and Hedge Funds", generously hosted by McKinsey.  You can download my slides here.  I look forward to learning more about this area at next week's Capital Roundtable Masterclass on "The Art of Building the Right Deal Flow", in New York.  I would welcome your feedback.

Career Acceleration | Events | Private Equity Investing | Social Software

 

A constant complaint we hear around the office is that emails we receive (and sometimes send) are poorly written or unclear.  According to “How to Write a Perfect Email”, when writing an email that warrants a reply, there are four key components to get a quick and valid response:

 

1. Brevity- Keep it short.

2. Context- How do you know me/where did we meet (Give information that would make a person remember you) and put it in the subject line.

3. Something to Act On- Make the request clear and ask closed ended questions.

4. Set a Deadline- Set a date when you need the information, give one follow-up email and then pick up the phone.

 

My colleague Michelle Reicher observed that the guidelines set in this blog are a good standard to follow, but, "I disagree with the blanket advice to ask closed ended questions. Keep the request and question clear and concise, but allow the responder to give as much information as is necessary to move forward. When one sends an email with questions, the goal is to solicit a response, but it is important to have a complete, comprehensive, and useful response not just a yes/no answer. Yes/No responses answer the immediate question, but do not allow farther explanation that may answer future questions or give farther insight into the matter at hand."

 

In The Cranking Widgets Blog: “How to Construct the Perfect Email Subject Line”, the blogger observes that a good subject line is imperative for a successful email:

“There are 3 simple tips that, if implemented properly, will make your email subject (and, subsequently, your email) much easier to read.

1.      Use Keywords [to identify the purpose of your email.] All email messages fall into one or more of 4 possible categories:

o        Questions (or messages that elicit a response from the reader)

o        Responses (messages that are in response to questions or other inquiring messages)

o        Informational (or FYI - messages that are meant to inform but don’t require a response)

o        Spam (jokes, pictures of your nephew’s baseball game, etc. - as well as actual spam)

2.      Briefly describe the subject - This is best done before you start writing your message. Finding the right balance between vague and overly-specific can be tough. Personally, I think it’s like anything else - you get better at it with time.

3.      For Pete’s sake, never leave the subject blank - This is something I’ve mentioned before, and it bears repeating.”

 

The body of the email will never be read if the context of the subject line does not act as an icebreaker or a contextual reminder. If the subject line merely says, “Hi” then it is synonymous to a cold call, but if the subject line identifies the business or how you know this person it becomes analogous to a warm call or a referral, which are generally more fruitful and productive than an unsolicited call.

Career Acceleration | Personal Productivity | Social Software

My colleague Jesse Mandell took detailed notes on the recent SIIA panel on Brown Bag Lunch: Content is Dead, Community is King? The Promises and Risks of Social Networking in the Information Industry".  You can view the web broadcast at no charge here.

 

Panelists:
Leslie Forde, VP of Strategic Alliances, Communispace
Leslie is a member of Communispace’s Management Team and is responsible for developing strategic partnerships with customer-focused organizations including marketing consultancies, advertising and public relations firms. She helps Communispace’s partner companies to effectively leverage customers by bringing them into the marketing conversation. Partners such as Ogilvy & Mather, Edelman and Digitas are using communities to deliver more value to their clients: to differentiate their brands, drive greater advocacy, foster loyalty, and overall, to improve marketing effectiveness. Leslie is a frequent speaker on hot topics such as: creating online customer communities, customer engagement, Web 2.0, social networking, and word of mouth. She sits on the Word of Mouth Marketing Association’s leadership committee.  Leslie is no stranger to creating effective partner alliances. Prior to Communispace, she was the Corporate Sales Director for Cook’s Illustrated and managed channel sales and marketing efforts across all products including: retail book distribution, sponsorship for the public television show ‘America’s Test Kitchen’, and alternate circulation programs for multiple publications.  Prior to Cook’s, Leslie was a Vice President at Northern Light Technology where she managed sales, marketing, and business development efforts in the US and abroad. She moved to London to launch the company’s International Division, where she lived for over two years and grew enterprise clients and alliances by over 300% within the first six months. Previously, she held marketing and brand management positions with Xerox, Bausch & Lomb, and Allstate Insurance.

Kim Kobza, President and CEO, Neighborhood America
Kim Patrick Kobza is a co-founder of Neighborhood America and has led the company through its growth and development since 1999. Mr. Kobza developed many of the original concepts on which the company is founded, helps drive its ongoing vision, and is responsible for revenue growth.
Mr. Kobza's diverse career is characterized by involvement in leadership practices and community building. His background includes education and practice in economics, business, and law. Kim Kobza is a visionary and frequently speaks on the importance of leadership and community building in both business and public disciplines.
Mr. Kobza participates in ongoing education and leadership opportunities with many national leadership organizations and is a graduate and frequent participant in the Harvard Executive Leadership series on Cross Boundary Collaboration. He holds a J.D. from Wayne State University; B.S. degrees from Central Michigan University in the areas of Economics, Mathematics and Earth Sciences.

Scott Parry, General Manager, Reuters AdvicePoint
Scott Parry has over 15 years of experience in the financial industry. His experience includes building and marketing financial information products and leading the development of innovative online brokerage services. Currently Scott is the General Manager of AdvicePoint, Reuters' Web 2.0 online community that connects investors, financial advisers, and investment product companies.
Previous to Reuters, Scott was the VP of Institutional Sales at Invesmart Advisors. Scott helped found Ameritrade Institutional Services and managed Ameritrade Retirement Services and Ameritrade Corporate Services. Scott was responsible for the creation of numerous online brokerage/information services.
Previous to Ameritrade, Scott was the VP Sales & Strategy for Nelson Information, a division of Thomson Financial where he drove the rapid growth of Nelson Information from a print directory publisher to an online information provider.
Scott has a BS from Charter Oak State College with a concentration in organizational management and is working toward a MS in internet technology at Pace University. He holds Series 7, 24, 63, & 65 brokerage licenses.

David Teten, Founder and Managing Director, Nitron Circle of Experts
David Teten is Founder and Managing Director of Nitron Circle of Experts, an Evalueserve company. Nitron is a research firm which provides institutional investors, corporations, and law firms with industry insights from a network of frontline industry experts. David was formerly CEO of Nitron, which he sold to Evalueserve. He was formerly CEO of Teten Recruiting, which he sold to Accolo, the 2006 fastest-growing private company in the San Francisco Bay Area. He was also formerly CEO of GoldNames, an investment bank focusing on serving the internet domain name asset class. David worked with Bear Stearns' technology/defense Investment Banking group, and was a strategy consultant with Mars & Co. He is an Advisory Board member of Accolo, Grouply, and the Word of Mouth Marketing Association. David is the lead author of The Virtual Handshake: Opening Doors and Closing Deals Online, the first book about how to sell, market, and close deals more effectively with online networks and other Web 2.0 technologies. He runs TheVirtualHandshake.com resource site and blog and co-writes a monthly column for FastCompany.com about Web 2.0 technology. David is a frequent keynote speaker to finance and technology conferences. David holds a Harvard MBA and a Yale BA and lives in New York with his family and two notebooks.

Moderator:
Karen Christensen, CEO, Berkshire Publishing Group
Karen Christensen is publisher, entrepreneur, and author specializing in global issues who began her career in London and founded Berkshire Publishing Group in 1998. She is editor/publisher of Berkshire's GuanxiOnline (http://www.guanxionline.com/), which helps professional people navigate today's China, and is a member of the National Committee on U.S.-China Relations (http://www.ncuscr.org/). Karen is co-editor of Global Perspectives on the United States and launched the community website http://www.loveushateus.com/ in 2006. Karen is an occasional journalist as well as the author of a number of popular books, including The Armchair Environmentalist, that have been translated into French, German, Japanese, Korean, Thai, and traditional and simplified Chinese. She blogs about publishing and social media at http://www.berkshirepublishing.com/blog and about China at http://www.guanxiblogs.com/karenchristensen.

 

 

NOTES ON PANEL

 

KC: Halloween is a good time to hold a panel. It is one of the few times where we gather with many different people we don’t really know to celebrat