News

Wednesday, 05 September 2018

4th Risk Management Symposium - Oxford - 22-23 November 2018

After the success of the three previous Risk Management Symposia, a fourth edition will again take place at the Private Equity Institute, Saïd Business School, Oxford on 22-23 November 2018.

Some highlights of the programme:

  • "Hostages to fortune: the problem of LPs and GPs being misaligned" – presentation by Eamon Devlin, MJ Hudson
  • "Making heads and tails of private equity risk: A distribution-based approach" – presentation by Avi Turetsky, Landmark Partners
  • "Quantitative strategies for private equity portfolio construction" – a presentation by Sofia Gertsberg, HarbourVest
  • "Is it worth trying to time private equity allocations?" – a presentation by Tim Jenkinson, Saïd Business School, Oxford University

A further pre-dinner talk on 22 November by Hans Lovrek, Commenda Private Equity Consulting will shed some light on medieval Venice: "The Commenda – risk financing in medieval Venice".

 

The Symposium's programme can be found here. Registration is possible here.

 

We are looking forward to seeing you again in Oxford in November!


Thursday, 16 August 2018

Private Equity and Forecasting: From "It's Complicated" to Why Would I?"

A new article by Didier Guennoc can be found on LinkedIn


Monday, 18 June 2018

Return Projections - example report

A template report for return projections, liquidity profiling and risk management can be downloaded here


Monday, 16 April 2018

The behaviour of buyout funds when confronted to an adverse economic environment

The full article can be read here

 

Funds with vintages 2005-2007 have weathered one of the worst financial storms in financial history. Ten years later we have sufficient data to analyse the behaviour of European buyout funds that went through these difficult times. The objective of this paper is to measure how funds that deployed their capital in an environment characterised by a supportive economic growth, low interest rates (it was the feeling at that time), high leverage and ever increasing asset prices, reacted to the economic storm that was unleashed in the fall of 2008.

While the group of selected funds as a group confirm intuitive results, the underlying patterns show a very different story.It is imperative that decisions are made on the basis of solid analyses.

The transition matrices resulting from these analyses are of prime importance for the models used by LDS Partners. Projections of expected future returns, of liquidity profiles and the stress testing of portfolios of funds have a much higher likelihood of mirroring the future reality.


Wednesday, 11 October 2017

2017 Risk Management Symposium - 29&30 November

After the success of the three previous Risk Management Symposia, LDS Partners, Luxembourg, and the Private Equity Institute, Saïd Business School, Oxford, have partnered again for the 2017 Symposium.

The symposium programme is finalised. Participating firms this year - registered until 3 November 17:

  • 17Capital
  • Al Muhaidib
  • Alyafi Group
  • APG Asset Management
  • Ardian
  • Augentius
  • BaltCap
  • Capital Dynamics
  • CDC Group
  • Cerulli Associates Europe Ltd.
  • Citigroup
  • Coller Capital
  • DB Private Equity
  • EBRD
  • EQT
  • ETF Partners
  • European Investment Fund
  • Ffs
  • Finnish Industry Investment
  • Hermes GPE
  • Infospectrum Ltd.
  • Inter Fund Management
  • Invest Europe
  • JP Morgan
  • Lappeenranta University of Technology
  • LDS Partners
  • Max Planck Institute for Human Development
  • Mercer
  • Paribus Capital GmbH
  • The Abraaj Group
  • UBS Asset Management
  • Unigestion SA
  • Validus Risk Management
  • Vision Capital
  • Waterland Private Equity Investments

You can register here.


Monday, 15 May 2017

Secondary Sale of a Portfolio of Interests in Closed Ended Funds

LDS Partners provides a secondary pricing service, which for obvious reasons has specific data needs. The surge in the use of virtual data rooms has certainly increased the information readily at the disposal of the parties. Drooms publised a post by Didier Guennoc on this specific topic.

Read more about it here.


Wednesday, 15 February 2017

3rd Party AIFMs and substance - risk management for UCITS and AIFs, not quite the same

3rd party UCITS managers deciding to expand their services and act as well as 3rd party AIFM are confronted to the challenge of conducting a robust risk management function.


As the scope of eligible financial instruments in the UCITS regulation has evolved over time, the 3rd party UCITS managers have had to cope for a while now with assets that are not quoted on an active market. However, the restrictions put on such eligible assets regarding their share in the portfolio of any UCITS, their valuation in terms of independence of the valuation process, their accuracy and timeliness have made possible to run relatively low cost and traditional approaches such as the historical method (using past observed prices or valuations to deduct a Value-at-Risk) or the parametric method (assuming a normal distribution of the valuations/prices with an observed variance/covariance matrix). The use of a tracker duplicating more or less the behaviour of the non-listed financial instruments can even be considered.

However, it turns out that when becoming 3rd party AIFM, players are confronted with non-listed assets whose characteristics, valuation processes and frequency of reporting direct a robust risk management function towards more sophisticated modelling with the use notably of the Monte Carlo method.

When 3rd party AIFMs embark on this journey, they usually rely on traffic light indicators built on qualitative questions regarding the exposure to market risk, credit risk, liquidity risk, counterparty risk and operational risk. The question is then how to move from this starting point to the production of more powerful risk indicators such as Value-at-Risk, cash flow projections and expected returns to both provide substance and help their clients in marketing and normalizing their products in the portfolio of investors.

Through its long experience in risk management for closed ended funds consisting of illiquid assets such as positions in unlisted companies or real assets, LDSP is at the forefront and assists 3rd party AIFMs in making the difference for their clients.


Wednesday, 01 February 2017

Example report risk parameters for fund investments

LDS Partners' example report of risk parameters for fund investments: download here


Thursday, 19 January 2017

Currency Hedging - A quantified example

Forex volatility and the ability to implement successful currency hedging currency strategies for private equity portfolios - a quantified example

A case study quantifying different strategies that could have been followed for a buyout fund vintage 2005 denominated in GBP with regard to the GBP/USD currency fluctuations impact: read article here


Friday, 09 December 2016

Risk Management for Private Equity: Turn a regulatory burden into a competitive edge

The first rounds of reporting under the Alternative Investment Fund Managers Directive (AIFMD - 2011/61/EU) to the regulator have now been done. A hassle and an additional expense for most, but adding value for those that look at this cleverly.


Yes, it is an additional burden and cost for the managers and the funds. The regulators appreciate the oversight and seem at ease with the asset class. LPs also are starting to use this data and integrate it into their risk management programs, to the benefit of an increased exposure to the asset class.


But more importantly, an increasing number of managers have found added value by using the risk return profiling beyond the regulator's obligations and as such making a difference.


For clarity reasons, a risk return profile is the probability distribution of final expected returns and the expected liquidity of a fund.


Some of the requests we get from the GP clients using our services:

    • My portfolio is not mature, and I'm fundraising. I want to give robust indications of the ultimate expected return
    • I want to assess the impact of a new investment on my current risk return profile, i.e. on my return expectations and particularly my liquidity profile
    • Liquidity events are happening later than expected, how can I reassure my investors?

 

These instances are exactly when the usability of the risk return profiling proves itself. A simple, straightforward but robust analysis that is credible and well perceived by the LPs. It is about using the same "language", the same metrics, as the LPs.


GPs can either do the risk management in-house or, externalise the analyses and reporting, while still maintaining the ultimate responsibility. The in-house risk management function, if well done, can prove to be challenging and expensive, especially since often there are only punctual needs. In GP structures, the bulk of the activity should rightfully be directed towards investment opportunities and investment management. This is ultimately what the LPs are paying for.


Outsourcing the analytical work without delegation of responsibility is an efficient way forward:

    • It keeps the risk management responsibility in-house.
    • It provides the decision tools, reports and analyses in a recurrent manner.
    • It is confidential.
    • The risk return and the liquidity profiling are done on the fund level and on individual investment level.
    • The impact on fund return expectations when adding a new investment is addressed whenever the need arises.

 

LDS Partners has put in place a fully-fledged service that provides the GP with the necessary reports and analyses to be able to support the risk management function, assuring that the tools and methodologies are up to standard for the noticed increasing scrutiny of the regulator. The responsibility remains with the GP but he/she disposes of all necessary input to be able to assume the risk management function while having access to specialists' know-how and up to date regulatory requirements.


For any question or comment please contact us at LDS Partners contact@ldspartners.com


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