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1

Private Equity Club

FundraisingTuesday 11th October 2005

PwCconnectedthinking* PwC

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Private Equity ClubPricewaterhouseCoopers

Agenda

Introduction

Fundraising & Investment Trends – Keith Arundale, www.keitharundale.com

Fundraising & The Private Equity House – Tim Reid, MVision Private Equity Advisers Limited

Fundraising & The Investor Perspective - Pension Schemes – Peter Tompkins, PricewaterhouseCoopers LLP

Questions & Panel Discussion

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Private Equity Club

Fundraising and Investment TrendsKeith Arundale(www.keitharundale.com)


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Contents

• World View• EVCA European Private Equity Data for 2004 and first half of 2005• BVCA Performance Measurement Survey 2004

5


The World View

Global Private Equity Investment and Fund Raising Trends

6


The World ViewPrivate Equity Investment and Fund Raising Trends

110131

70

124

192

103 86

115133

154

262

177

93 87

0255075

100125150

175200225250275300

1998 1999 2000 2001 2002 2003 2004

InvestmentsFunds Raised

(US$b)

Source: The PricewaterhouseCoopers/Venture Economics/National Venture Capital Association MoneyTree™ Survey / Buyout Newsletter / Private Equity Analyst / CVCA Annual Statistical Review / EVCA Yearbook / AVCJ Guide to Venture Capital in Asia / Venture Equity Latin America / SAVCA Private Equity Survey / IVC Online

Investment: Compound average growth rate = 7.74%Funds Raised: Compound average growth rate = -0.18%

Note: Israel did not raise any funds in 2002, but returned $145 million

Note: The data for Eastern Europe, Middle East & Africa and Central & South America has been up-weighted to take account of under-reporting in these regions

www.keitharundale.com

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The World ViewFull Year 2004

Main Headlines• Approximately $110 billion of private equity and venture capital was invested globally in 2004

– a decrease of 5% on the 2003 level of $115 billion.• This is equivalent to 0.30%* of the world’s gross domestic product.• More than $131 billion of funds were raised globally in 2004 – up 51% from $87 billion in

2003.• Sub Headlines• Technology investments totalled approximately $45 billion in 2004 – 41% of total investment.• At least $22 billion was invested in expansion stages in 2004 – up 6% on 2003 levels.• Approximately $67 billion was invested globally in buyouts in 2004 – a decrease of 9% on

2003.

*Based on 2003 GDP, from World Bank Development Indicators – $36,461 billion

Note: Historical data has been revised based on amendments published in 2003. Data converted to US dollars using a fixed exchange rate from 1998 obtained from oanda.com.


8


The World ViewTop 20 Countries (Based on Investment)

2. United Kingdom (2)4. France (4)5. Germany (7)6. Spain (10)9. Netherlands (11)10. Sweden (12)11. Italy (5)19. Denmark (20)

EuropeNorth America1. USA (1)17. Canada (13)

Middle East & Africa15. South Africa (15)16. Israel (16)

Central & South America

41%

1%3%

39%16%

Asia Pacific3. Japan (3)7. Australia (6)8. China (9) 12. Korea (8)13. India (14)14. Singapore (18)18. Malaysia (-)20. Pakistan (-)

Note: Individual country data is not available for Central and South America.

Note: Figures in brackets indicate their position in 2003


9


The World ViewTop 20 Countries (Based on Investment)

Country Ranking Investment Value

Funds Raised

Country Ranking Investment Value

Funds Raised

1. USA 43.76 84.74 11. Italy 1.73 1.95

2. UK 22.36 11.78 12. Korea 1.56 0.37

3. Japan 7.06 5.54 13. India 1.34 0.66 4. France 6.12 2.82 14. Singapore 1.29 0.92

5. Germany 4.41 2.32 15. South Africa 1.26 0.40 6. Spain 2.30 1.85 16. Israel 1.22 0.72

7. Australia 2.17 1.86 17. Canada 1.19 1.13

8. China 2.06 0.44 18. Malaysia 0.76 0.12

9. Netherlands 1.94 3.76 19. Denmark 0.46 0.63 10. Sweden 1.90 4.28 20. Pakistan 0.40 -

US$ Billion



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The World ViewTop 20 Countries (Based on Growth – CAGR 98-04)

North America

Middle East & Africa9. South Africa (21%)14. Israel (13%)

Central & South America

Asia Pacific1. Pakistan (141%)3. India (56%)4. Malaysia (56%)6. Japan (40%)7. Australia (38%)11. Singapore (20%)13. Korea (17%)17. China/HK (9%)

Note: Individual country data is not available for Central and South America.

Note: Only countries with investments of at least $0.30 billion in 2004 shown

2. Denmark (62%)5. Sweden (41%)8. Spain (33%)10. France (20%)12. United Kingdom (18%)15. Germany (12%)16. Norway (11%)18. Netherlands (8%)19. Italy (8%)20. Switzerland (4%)

EuropeNote: The US and Canada have compound average growth rates of 2% and 1% respectively, since 1998.


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The World ViewCumulative Investments and Funds Raised (98-04)

Region Investment Value

Funds Raised Overhang

Global 800.27 1,037.79 237.52 North America 457.00 691.52 234.52 Europe 226.33* 253.98 27.65 Asia Pacific 81.84 68.84 -13.00 Middle East & Africa 16.06* 12.95* -3.11 Central and South America 19.04* 10.50 -8.54

US $ Billion

Note: *The data for Eastern Europe, Middle East & Africa and Central & South America has been upweighted to take account of under-reporting in these regions



12

EVCA European Private Equity Data for 2004 and first half of 2005

EVCA data collated by Thomson Venture Economics and PwC

13


European Private Equity : Activity Flows

27.5

4.4

25.4

27.5 27.0

8.0

20.0 20.3

40.0

48.0

29.1

5.5

9.7

6.8

14.5

25.1

35

24.3

27.6

36.9

10.7

13.612.5

9.18.6

7.0

19.6

5.8

3.1 3.6

0

5

10

15

20

25

30

35

40

45

50

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

Funds Raised

Investments

Divestments

€bill

ion

2004 European Private Equity SurveyConducted by Thomson Venture Economics and PricewaterhouseCoopers on behalf of EVCA


14


European Private Equity & Venture Capital Activity

3,061

4,398

1,286

3,3673,666

918

6,827

5,447

972

4,035

5,456

2,2172,750

5,844

3,7053,610

6,575

2,9924,744

8,499

2,613

6,237

7,351

2,949

9,635

4,095

3,307

19,943

4,864

2,619

0

5000

10000

15000

20000

Q1 2003 Q2 2003 Q3 2003 Q4 2003 Q1 2004 Q2 2004 Q3 2004 Q4 2004 Q1 2005 Q2 2005

Funds Raised Investments Divestment at cost

€ m01/01/2003 – 30/06/2005

Source: EVCA/Thomson Venture Economics/PricewaterhouseCoopersNote: these data are updated from one quarter to another and are therefore subject to change


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2.15.4

17.014.7

18.2

33.229.8

20.3 20.716.6

1.5

1.63.8

5.3

10.8

8.4

5.8 4.6

6.9

1.3

1.4 1.8

1.9

1.8

1.5 1.7 4.0

1.3

4.0

0

5

10

15

20

25

30

35

40

45

50

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

€ billionCapital Gains

Amount Raised by Captives

Independent Funds Raised

€27 Billion Funds Raised for Europe in 2004



16


Evolution of Funds RaisedBy Amount (index - Q1 2002 = 100)

0

50

100

150

200

250

300

350

Q1 20

02

Q2 20

02

Q3 20

02

Q4 20

02

Q1 20

03

Q2 20

03

Q3 20

03

Q4 20

03

Q1 20

04

Q2 20

04

Q3 20

04

Q4 20

04

Q1 20

05

Q2 20

05

Funds Raised

Source: EVCA/Thomson Venture Economics/PricewaterhouseCoopersNote: The percentage change mentioned refers to the evolution of the current quarter vs the previous quarter

-52%+13%

+42%

-42% +10%

+100%-41%

-32%+31%

+31%

+31%

+54%

+107%


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2004 European Funds Raised Country of Management and Country of Origin

10.1 3.7 3.2 2.4 2.0 1.61.7

4.9

0.92.32.6

4.2

2.0

5.6

1.2

0

2

4

6

8

10

12

US UK

Swed

en

Neth

erland

s

Fran

ce

Germ

any

Italy

Spain

2004 Country of Management (GPs location)

2004 Country of Origin (LPs location)

€ billion

Note: US amount of € 5.6 billion comprises fundraising from US LPs to European funds



18


Sources of New Funds Raised

Corporate Investors7.0%

Private Individuals7.6%

Academic Institutions

1.5%

Capital Markets2.2%

Other9.2%

Fund of Funds13.5%

Insurance Companies

12.0%

Pension Funds19.3%

Banks21.7%

Government Agencies

6.1%

2004 2003

Corporate Investors4.8%

Private Individuals3.2%

Government Agencies

6.8%

Other17.3%

Capital Markets0.3%

Academic Institutions

1.5%Banks21.5%

Pension Funds19.4%

Fund of Funds16.4%

Insurance Companies

8.7%



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Expected Allocation of Funds Raised

Buyout64.8%High-Tech Expansion

4.1%

Non High-Tech Expansion

20.6%

High-Tech Early-Stage

4.9%

Non High-Tech Early-Stage

2.3% Other3.3%

Buyout77.7%

High-Tech Expansion2.6%

Non High-Tech Expansion

10.6%

High-Tech Early-Stage

5.7%

Other1.2%

Non High-Tech Early-Stage

2.2%


2004 2003


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Expected Allocation of European Funds Raisedin Q2 2005

High-Tech Early-Stage0.4%

Non High-Tech Early-Stage5.8%

High-Tech Expansion/Development

0.9%

Non High-Tech Expansion/Development

3.3%

Buyout89.6%

Other0.0%

Source: EVCA/Thomson Venture Economics/PricewaterhouseCoopers


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€37 Private Equity Invested in Europe

3.65.6

8.5

14.4 15.312.1

17.920.7

26.6

2.63.2

4.1

6.0

10.7

19.7

12.2

9.88.4

10.3

2.90

5

10

15

20

25

30

35

40

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

€ billion

Venture Capital

Buyout



22


Evolution of Investment ActivityBy Amount (index - Q1 2002 = 100)

0

50

100

150

200

250

Q1 20

02

Q2 20

02

Q3 20

02

Q4 20

02

Q1 20

03

Q2 20

03

Q3 20

03

Q4 20

03

Q1 20

04

Q2 20

04

Q3 20

04

Q4 20

04

Q1 20

05

Q2 20

05

Investment


+41%

+23%

-4%

-28%

-17%+49%

+7%+0.2%

+12%

+29%

-14%

-44%

+19%


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2004 European InvestmentsCountry of Management and Country of Destination

19.1 5.2 3.8 2.0 1.7 1.6 1.5

5.1

1.92.23.5

2.3

6.4

9.7

0

5

10

15

20

25

UnitedKingdom

France Germany Spain Netherlands Sweden Italy

2004 Country of management

2004 Country of destination

€ billion



24


Stage Distribution of InvestmentsAmount Invested

Buyout63.4%

Replacement Capital7.9%

Expansion21.4%

Seed0.5% Start-up

6.8%

Buyout69.7%

Replacement Capital2.5%

Expansion21.4%

Start-up6.0%

Seed0.4%


2004 2003


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European Investment Activity Q2 2005

0.3% 7.8%

23.1%

7.1%61.7%

SeedStart-upExpansionReplacement CapitalBuyout

% of number of investments% of amount invested


2.4%

21.9%

37.8%2.0%

35.9%


26


European Investment Activity Q2 2005

New Invest-ment

45.5%

Follow-on Invest-ment

54.5%

% of amount invested


New Invest-ment

39.7%

Follow-on Invest-ment

60.3%

% of number of investments


27


€19.6bn European Divestment at Cost

33.0% 33.9% 30.9% 20.4% 23.7%

21.3%

15.9%

8.4%

14.5%20.0%

13.1%20.2%

3.9%

3.8%

11.6%9.7%11.6%

30.0%

22.8%7.6% 2.9%6.0%

3.9%4.3%

3.9% 7.0%6.23%

5.3%9.1%

7.7% 4.8%5.6%

6.6%6.3%17.5%14.1%11.0%9.5%10.3%

0%

20%

40%

60%

80%

100%

2000 2001 2002 2003 2004

Other

IPO

Sale of Quoted Equity

Sale to Financial Institution

Write-Off

Sale to Another VentureCapitalist

Repayment of Shares/Loans

Trade Sale



28


European Divestment Activity Q2 2005

9.9%

7.1%

1.7%

3.7%

47.0%

13.2%

4.5%2.6% 10.4%

Trade saleFlotationSale of quoted equityWrite offRepayment of principal loanSale to other VCSale to financial institutionsSales to managementDivestment by other means


22.0%

2.6%

8.6%

6.7%

17.1%3.9%

2.2%

12.7%

24.2%

% of number of divestments% of amount divested


29


Evolution of Divestment ActivityBy Amount (index - Q1 2002 = 100)

0

50

100

150

200

250

300

350

400

Q1 20

02

Q2 20

02

Q3 20

02

Q4 20

02

Q1 20

03

Q2 20

03

Q3 20

03

Q4 20

03

Q1 20

04

Q2 20

04

Q3 20

04

Q4 20

04

Q1 20

05

Q2 20

05

Divestment


+21%

+14%-16%

+1%

-29% +6%

+128%

+67%

-19%

-13%+13%

+12%-21%


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Source: AVCJ Guide to Venture Capital in Asia

(US$b)

17.6 17.6

10.7

5.0

7.2

9.1

11.212.3

9.1

4.93.3

3.0

9.9

17.916.6

7.4

1.84.0

5.6 5.2 3.7

0

2

4

6

8

10

12

14

16

18

20

1998 1999 2000 2001 2002 2003 2004

InvestmentsFunds RaisedHigh-Technology

Investment: Compound average growth rate = 23.70%High-Technology: Compound average growth rate = 26.68%Funds Raised: Compound average growth rate = 6.27%

Asia PacificPrivate Equity Investment and Fund Raising Trends


31


Asia PacificFull Year 2004

Main Headlines• Approximately $17.6 billion of private equity and venture capital was invested in the

Asia Pacific region in 2004 – similar to 2003 levels.• This is equivalent to 0.21%* of Asian GDP.• $10.7 billion of funds were raised in Asia Pacific 2003 – up 222% on 2003 levels.

Sub Headlines• Technology investments in Asia Pacific totalled an estimated $7.3 billion in 2004 –

up 46% on 2003 levels.• At least $2.1 billion was invested in expansion stages in 2004 – a decrease of 17%

on 2003. • The buyout market totalled a record $11.2 billion in 2004 – up 32% on 2003.

*Based on 2003 GDP, as calculated using The World Bank Development Database – $8,501 billion

No GDP data available for Taiwan


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(%)

Total Invested(Billions)

63

11

8

12

4

2

0

10

20

30

40

50

60

70

80

90

100

2004

$17.6


Start-up/early stage

Expansion

Mezzanine

PIPE Financing

Turnaround

Buyout

Asia Pacific% Stage of Investment

Global Private Equity 2005


33


1.3

1.6

2.1

2.2

7.1

0.00 1.00 2.00 3.00 4.00 5.00 6.00 7.00 8.00

India

Korea

China

Australia

Japan

(US$b)

Investment as % of GDP

0.26%

0.16%

0.42%

0.15%

0.22%


Asia PacificInvestment by Country (Top 5)

Global Private Equity 2005

Total Investment: $17.6 billion


34

BVCA Performance Measurement Survey 2004

Conducted by PwC

35


Summary of UK Private Equity Performance versus Principal Comparators

19.8

11.5 9.4

14.8

1.8

-3.0

11.2

3.90.1

12.88.1 7.9

-10.0

0.0

10.0

20.0

30.0

40.0

2004 Three Years Five Years Ten Years

Total Private Equity FTSE All-Share WM Pension Fund Universe

% pa

36


UK Private Equity - Since Inception Performance by Investment Stage and Subset to December 2004

8.2

11.3

16.013.6

11.814.0

0.9

14.2

-2.9

13.013.2

-5.0

0.0

5.0

10.0

15.0

20.0

Early

Dev

elop

men

t

Mid

MB

O

Larg

e M

BO

Gen

eral

ist

Tota

l

UK

Non

UK

Pan-

Euro

pean

Tech

nolo

gy

Non

-Te

chno

logy

% pa

37


1.2

-13.2-10.3

13.7

7.111.5

-6.5-7.1-5.3

14.8

-3.4

10.712.5

29.6

16.119.714.1

17.3

12.7

2.6

18.519.8

9.414.8

-20

-10

0

10

20

30

40


Early Development Mid MBO Large MBO Generalist Total

% pa

Summary of UK PE Performance by Investment Stage

38


UK PE Capital Raised by Investment Stage - December 2004

1.1

6.64.5

17.6

3.0

32.9

0.0

5.0

10.0

15.0

20.0

25.0

30.0

35.0

40.0

Total Early Development Mid MBO Large MBO Generalist

£m

39


UK Private Equity Performance by Sub Sector

11.5 9.4

-13.0 -9.6-4.3

11.06.7 5.0

23.3

13.8 12.114.819.8

2.1

16.513.4

16.912.1

14.322.4

-20.0

0.0

20.0

40.0

60.0

80.0


Total Technology UK Non UK Pan-European

% pa

40


Since Inception Return by Vintage Year to December 2004

9.5

13.811.1

23.320.3

14.0

34.4

21.9

18.5

14.3

10.6

4.81.5

-5.0

0.0

5.0

10.0

15.0

20.0

25.0

30.0

35.0

40.0

1980-84

1985-89

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000

% pa

41


Summary

European private equity on course for record fund raising in 2005

90% funds raised allocated to buyouts; only 1.3% to high tech venture capital

European private equity investments reached record level in 2004, but first half of 2005 down 28% from same period in 2004

62% of investment amount is buyouts; seed/start-up is 8%

Divestments down in Q2 2005, after rising in Q1 2005

Europe now 39% of global private equity investment, compared to North America’s 41%

Private equity continues to outperform principal comparators in the medium and longer term.

42


Data Sources

North America: The PricewaterhouseCoopers / Venture Economics / National Venture Capital Association MoneyTree™ Survey www.pwcmoneytree.com

Buyouts, a Venture Economics publication www.ventureeconomics.com

The Private Equity Analyst, published by Asset Alternatives, Inc., Wellesley Massachusetts 781-304-1400 www.assetnews.com

Canadian Venture Capital Association (CVCA) Annual Statistical Review, prepared by Macdonald and Associates Limited www.cvca.ca

Europe: European Private Equity and Venture Capital Association (EVCA) Survey, conducted by PricewaterhouseCoopers and Thomson Venture Economics www.evca.com

Asia Pacific: Asian Venture Capital Journal (AVCJ) Guide to Venture Capital in Asia and estimates from the AVCJ for 2002 www.asianfn.com

Central/South America: Venture Equity Latin America 2003 Year-End Report www.ve-la.com

Middle East and Africa: The Kesselman and Kesselman PricewaterhouseCoopers™ MoneyTree Survey, Israel www.pwcmoneytree.com

Israel Venture Capital Research Centre Annual Survey www.ivc-online.com

KPMG and the South African Venture Capital Association (SAVCA) Private Equity Survey www.savca.co.za

43

© 2004 PricewaterhouseCoopers LLP. All rights reserved. “PricewaterhouseCoopers” refers to PricewaterhouseCoopers LLP (a limited liability partnership in the United Kingdom) or, as the context requires, other member firms of PricewaterhouseCoopers International Limited, each of which is a separate and independent legal entity. *connectedthinking is a trademark of PricewaterhouseCoopers.

PwC

Thank You.


44

Private Equity Club

FundraisingTim ReidAssociate DirectorMVision Private Equity Advisers Limited

PwCconnectedthinking*

45


Fundraising

GPs and the fundraising process

Investors and the fundraising process

Targeting investors

Evaluating a fund

Representative timetable for fundraising

Strategies for a successful fundraising

Use of a placement agent

46


GPS and the Fundraising Process

General Partners are either:• Growing and actively seeking new investor relationships• Have reached their optimum size in terms of investor relations – but do

they have the right investors?• Are over subscribed and closed to new investors – is it time to alter the

mix?

In order to maintain the future funding of their businesses, General Partners need a strong and diversified investor base in terms of geography and type

How do General Partners develop relationships with investors in order to achieve their optimal investor base?

• They know the investors• They have heard of them and call them directly• The investor uses an advisor or gatekeeper for introductions• Introduction by an adviser

47


Investors and the Fundraising Process

How do investors gain access to the funds they want to invest with?• They know the fund already• They have heard of them and call them directly• The Fund has a marketing representative/adviser

How can investors market themselves• Be pro-active in fund identification and selection

- Develop relationships with other investors- Attend conferences and network- Develop relationships with advisors- Open a dialogue with the General Partner

48


Targeting Investors – The target investor list

Europe North America Middle East Asia

France Germany Italy Nordic Switzerland UKBenelux East Coast West Coast Mid West Central Canada UAE Australia SingaporeJapanKuwait

Page 48

49


Evaluating a Fund

Depth and stability of team Track record

– Well executed investment strategy– Realisations (recent, solid) – Current portfolio is stable

Existing investors support first close

Succession plan clearly communicatedTerms / conditions are acceptableInvestor belief in differentiated “edge”

– Deal sourcing and acquisition – Add value during ownership– Profitable exit

Marketing PointsAppropriate fund sizePre-launch momentum

– Successful realisation– Strong pre-marketing effort

Well prepared

Posi

tives Internal issues -perceived or real

Track record – Style drift– Young portfolio– Lack of investment focus– Lack of exits

Team TurnoverExistings not committing or decliningTerms and conditions distract LP focusInvestor perception as followers

– Overpay, e.g. in auction– Financial engineers / arbitrageurs– Difficulty in exiting

Marketing PointsInappropriate fund sizeUnsuccessful pre-marketing with key new investorsPoor pre-launch preparation of due diligence and marketing materials

Negatives

Page 49

50


Representative Timetable for Fundraising

12th

Time frame (in months)

1st 2nd 3rd 4th 5th 6th 7th 8th 9th 10th 11th

Due Diligence and Select Key Meetings

Production of PPM and Other Marketing Materials;

Pre-Marketing by General Partners

Global Kick-off

Official Marketingand Roadshow

Investor Due Diligence Process and Meetings

Closing(s)

Page 50

51


Strategies for Successful Fundraising

Essential pre-Campaign Elements:• Track record (be realistic / be honest, detailed and clear)• Team (proven performers / stable team dynamics)• Investment focus and strategy (Demonstrable / credible and consistent)• Prioritise existing investor contacts• Select the right advisers and business partners well in advance

Understand market conditions:• Market sensibilities• Timing issues• Investor appetite/ other funds in market

Produce comprehensive marketing materials/ fine-tune delivery techniques

52


Use of a Placement Agent

Be able to relieve the GP of burdens in the areas of administration, creation of materials, logistics and relationship management

Develop and execute a targeted - rather than a ‘scattergun’ - strategy that will make most effective use of the GP’s principals’ time

• Analysing the existing investor base to help determine how the existing investor base will need to be managed through the fundraising process (including materials/ communication)

• Advising on and sourcing top quality new names for up-grade, replacement and/or expansion

Helping the GP interpret investors’ behaviour and reactions as the fundraising process unfolds

Helping to achieve the correct balance on Terms and ensuring ‘surprises’ are avoided

Compress and accelerate the process to achieve the GP’s objective in the least amount of time

Have broad market awareness and a highly developed knowledge of investor requirements to ensure that all aspects of the fundraise are accurately tailored for particular investor types and geographies

Fundraising is hard work! The right placement agent will:

53


PwC

54

Private Equity Club

Fundraising Investor Perspective –Pension Schemes

Peter TompkinsPartnerPricewaterhouseCoopers LLP


55


Current themes within the UK Pension Scheme Industry

The continued focus on the fundamental asset allocation needs ofthe pension scheme:

• Maturing schemes together with market based valuations has driven the need for greater liability matching approached – hence the increase demand for long-dated bonds

• Scheme-specific benchmarks are replacing the traditional peer group benchmarks

• Schemes moving towards mandates that offer greater diversification benefits such as global, non-UK, hedge funds and private equity

56


How UK Pension Scheme Asset Allocation has Changed

Average asset allocation (1962 - 2003)

0

10

20

30

40

50

60

70

80

90

100

1966 1971 1976 1981 1986 1991 1996 2001

(%)

PropertyCashOverseas BondsI-L GiltsUK BondsOverseas EquityUK Equity

Source: National Statistics, WM

57


Why have some Pension Schemes been attracted to Private Equity?

• The Myners Principles require Trustees to consider alternative asset classes as part of their strategy asset allocation process

• There are diversification benefits available because of the low correlation with the quoted UK equity market (not affected by investor sentiment but rather valuation determined by cashflow forecasts)

• The ability to deliver higher returns than other asset classes

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Challenges Some Pension Schemes have for Private Equity


PwC

• Volatile returns (specifically start-up or early stage schemes)• Uncertainty around commitment of funds • Illiquid investment (often up to 10 years)• It can be extremely difficult to withdraw from a private equity

investment, or to reduce the amount invested• Management fees can be on a scale of between 1% and 2.5% of

capital committed. In addition a 20% share of profit is not uncommon.

• Managers will call for funds when they have projects, therefore trustees need to ensure some liquid resources available

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PwC

…… Challenges some Pension Schemes have for Private Equity (cont)

• Minimum size investment means the asset class is the domain of the larger pension scheme

• Irregular and diversified valuations

• The lack of a defined benchmark to measure private equity managers

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Thank You.


PwC

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Discussion


PwC

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