Venture Capital（二）.pptVIP

Free template from Lecture 2:Venture Capital and Private Equity Structure of Lecture Defining PE. Why PE investing? PE and VC Funds Types. Operations. Alignment of interests. The VC cycle and process. Turning … Defining P/E and V/C Private Equity: Investments in private and public companies consisting of equity that is not quoted on any public / official stock exchange. Venture Capital: Investments that are made to finance new businesses, early developments or expansion. PE in the Investment Hierarchy PE vs. Public Equity Investments Size of investment universe. Companies listed on JSE: ≈ 500. SA Businesses of all sizes: many 10,000’s? By #, not % of economy. Drivers of Investment in PE PE → higher risk, higher return. Portfolio investing → risk reduction per individual investment. Reduces required rate of return for investing in risky assets. Flow of funds to private equity → growth of international and small cap PE markets (US and Europe). Getting in at the bottom… Companies with greatest growth potential often not listed (not corporates). SA Private Equity in Context Reasons for Investing in PE Diversification. Higher returns possible. Active investment - unlocking of value. Inefficient market and undervaluation. Other: Economic growth, ”empowerment” etc. Investing in a PE Fund Long time horizons. Risk-return profile and risk tolerance. Correlations between funds and listed equities. Intra-Fund correlations. Choosing high quality funds (with good underlying investments, monitoring systems and structures). Track records. Diversification across funds. US Venture Capital Partnership ReturnsVersus Public Market ReturnsFunds Formed 1969-2001 (quarterly returns) Correlations: PE Fund Sectors Constraints to Institutional Investment in Private Equity Regulatory restrictions. Low liquidity. Lack of regulation of unlisted entities. Lack of historical data. Risk / return trade-off. Valuation difficulties. Types of PE Financing See