Test Samir | eFront

How do you determine your private equity allocation ?
- You follow your peer group's example, trusting they make the right choice on average
- You calculate your own optimal return, risk and liquidity profile
- You optimize your risk-adjusted performance under constraints of liquidity and solvency targets, with an eye to ESG responsible investment
How do you build your private equity portfolio ?
- You select historical top performers, diversified across vintages and geographies
- You have a market view and you select regions, industries, strategies and stages to deliver on that
- You adopted an advanced portfolio construction process focusing on risk factors and relative value
How do you assess the management team of the fund ?
- You assess team cohesion and clearly defined roles
- You engage in individual analysis of the performance of each member of the team and you actively seek to identify the top talents to prepare for generational change
- You build a judgement on each manager based on the decade long history of connections, you conduct interviews and seek external references
What are your priorities at the negotiation stage ?
- The size of the management and performance fees and structure (e.g. waterfalls).
- You often seek better alignment through more skin in the game, and better governance, such as active participation on the Advisory Board
- You require a segregated account or negotiate the option to retain the final decision on investment
How do you monitor positions within your portfolio ?
- You build your own excel sheets to keep track of the evolution in value of your positions
- You combine the customized data bases with your own portfolio data
- You rely on the integrated system that feeds on exhaustive library of industry-wide transactions combined with powerful analytical tools
How do you measure a fund’s performance ?
- IRR
- IRR and multiples on invested capital
- IRR, multiples and public market equivalents
How do you assess risk ?
- You keep track of correlations between different positions in your portfolio and use VaR
- You measure the delta of top and bottom performers, assess macro-risks, measure distribution risk as a deviation of distributed cash multiple from the long-term average, plus VaR
- You have a comprehensive total portfolio view relying on a factor-based risk management system
What is your liquidity policy ?
- You are being passive in targeting liquidity and do not plan the timeline of the cash distributions
- You use the historical patterns of cash paid out by the PE funds you invested in, to predict the cash inflows and use the available financial instruments to compensate for the lack of performance of unused capital
- You rely on tools that integrate large data base of PE cash transactions and powerful analytical tools to make projections of cash distributions and actively engage in reinvestments to meet your annual pay-out schedule
What information do you ask and receive from your GP ?
- You attend the Annual General Meeting, receive the quarterly report
- You read quarterly reports carefully to extract the information on the fund level to analyse the dynamics of cash distributions and NAV and compare the reported performance with the funds co-investing in the same companies
- You build your own proprietary data base based on the information you ask from your GP or you rely on the platforms that collect and streamline granular data on the characteristics and performance of the assets in the fund’s portfolio
How do you benchmark realized performance ?
- You compare fund managers, like-with-like
- You analyse at the portfolio company level and benchmark against peers with comparable asset composition
- You analyse each investment manager’s return attribution to the total fund performance