A Seminar on 'Private Equity: Eclipsing Public Capital Markets'
Date: 19th September 09
Speaker – Mr. Rajesh Singh, CFA
Manager – Investment Research, Evalueserve.com Pvt Ltd.
Venue: IMA Convention Centre, Indraprastha Marg (Near ITO Building)
An evening seminar is being organized on the topic “Private Equity: Eclipsing Public Capital Markets”. The speaker is Mr. Rajesh Singh, CFA, Manager – Investment Research from Evalueserve.com Pvt Ltd.
Private equity, the current name of leveraged buyout is fast emerging as an “alternative” asset class for investors across the globe. With rising global liquidity and increasing investor interest in “alternative” asset classes that offer higher returns than the public equity market, inflows to the private equity market have exploded. In US, the most important providers of capital to the private equity are pension funds, insurance companies and wealthy investors. By focusing on long-term performance, by using high debt levels to achieve tough financial targets and taking long-term investment horizons that allow root and branch restructuring. As the pace of buyout deals has intensified, private equity is making public companies to rethink their strategy towards long-term sustenance and growth. In the years to come, the evidence suggests that private equity firms will mature, consolidate and diversify their investments, amplifying their influence on the global capital market. In 2008, private equity funds under management totaled $2.5 trillion at the end of 2008. By 2015, it is expected that funds under management will increase to over $3.5 trillion dollars.
The roots of the private equity can be traced back to 1980s, when the LBO industry came to prominence after the creation of high-yield “junk bonds”. For example, the industry used this high-yield “junk bonds” to finance huge takeovers including RJR Nabisco by Kohlberg Kravis Robert &Co. (the famous KKR) for $31.4 billion in 1988, perhaps the largest buyout of the era. The term private equity refers to three group: venture funds, LBO, and other private investment funds. VCs helps in early stage expansion and financing to the start-ups. LBO helps in the funding big-ticket acquisitions whereas private investment funds investment in specific industries such as real estate, KPOs etc.
As such, private equity funds are partnerships formed to acquire large (often controlling) stakes in growing, undervalued or under performing businesses. Outside investor, including public employee and private pension funds (the often called limited partners), generally contribute 90 to 98% of the equity capital used to acquire the businesses. The sponsor of the fund (often called general partner) provides the remaining 3 to 10% of fund capital. In addition to any actual cash capital it invests in the fund, the general partner typically receives equity interest in the future profits of the fund. This equity interest, which is known as the “carried interest,” is provided in recognition of the substantial, material, hands-on, work of the GP in structuring and directing the investments of the fund. The carried interest provides the general partner with upside potential similar to the potential afforded to the limited partners, and serves as to align the general partner’s interests with the limited partners. If the fund does well, the general partner shares in the gains; if the fund does poorly, the general partner may receive nothing.
For further information, on this seminar please contact