Risk Forum 2019 Private equity performance and asset

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Risk Forum 2019 Private equity performance and asset allocation: impact of low rates and

Risk Forum 2019 Private equity performance and asset allocation: impact of low rates and the J curve of cash flows Discussant: Sofia B. RAMOS ESSEC Business School

Paper’ Message § The real performance of a private equity block on an asset

Paper’ Message § The real performance of a private equity block on an asset allocation should take into account the return during the period before the cash is effectively invested by the GP, and including therefore the opportunity costs of the cash committed but not yet called. § The paper draws the attention for important issues on Private Equity performance evaluation § The methods used in the literature can be improved 2

Performance evaluation of investments Any approach should take into account • Time value of

Performance evaluation of investments Any approach should take into account • Time value of money • Risk What performance methods should be used? • Opportunity cost • Comparables üInternal Rate of Return 3

Comments #1 Better motivation • Is money really locked? • Typically how much time?

Comments #1 Better motivation • Is money really locked? • Typically how much time? • Provide anecdotes #2 Clarify • Performance analysis for the investor or for the firm? • Differentiate these two perspectives 4

Comments #3 Explore the sensitiveness of IRR • IRR a measure of profitability sensitive

Comments #3 Explore the sensitiveness of IRR • IRR a measure of profitability sensitive to amount and timing of cash flows #4 Instead of annual performance analysis, why not using semesters , quarters, months? To improve accuracy 5

Comments 5# Model Trade-off between lower financial buffer and impact on performance • Quantify

Comments 5# Model Trade-off between lower financial buffer and impact on performance • Quantify the impact of this financial slack in performance 6

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Acquisitions and private equity Introduction Private equity ByAcquisitions and private equity Introduction Private equity By
Private Equity as an asset class a PrivatePrivate Equity as an asset class a Private
PRIVATE EQUITY INTRODUCTION A Private Equity Fund investPRIVATE EQUITY INTRODUCTION A Private Equity Fund invest
AAVIN Private Equity A Leading Private Equity FirmAAVIN Private Equity A Leading Private Equity Firm