Friday, August 28, 2015

Operational Expertise Makes the Difference

YEP!!! Aivars Lode

Dealmaking has been going like gangbusters for private equity firms throughout 2014 and 2015. However, many experts believe that PE firms will have a hard time producing outsized returns from the deals they completed in today’s market, where valuations are very high and leverage is abundant. To help portfolio companies achieve growth in all situations, but especially in today’s environment, Advent International and Welsh, Carson, Anderson & Stowe have both developed extensive operating partner programs over many years.  
What follows is an excerpt of a conversation with Conor Boden, head of portfolio board development at Advent International, and Tony Ecock, a general partner at Welsh, Carson, who is responsible for helping portfolio companies identify and implement initiatives focused on growth and operational improvement. They share insights into how operations professionals can add value and why they are important to investment strategies. 
You can read the interview here.

- Privcap, August 2015

Stock-Market Tumult Exposes Flaws in Modern Markets

It's tough to get consistent returns without taking on unknown risk. Aivars Lode
Exchange-traded funds became hard to price as stocks tied to them cratered

Monday’s mayhem exposed significant flaws in the new architecture of Wall Street, where stock-linked funds—as much as shares themselves—now trade en masse on U.S. markets.

Many traders reported difficulty buying and selling exchange-traded funds, a popular investment in which baskets of stocks and other assets are packaged to facilitate easy trading. Dozens of ETFs traded at sharp discounts to their net asset value—or their components’ worth—leading to outsize losses for investors who entered sell orders at the depth of the panic.

Products built to provide insurance for investors came up short. As a result of trading halts in futures tied to the S&P 500 index, it was difficult for investors to get consistent prices on contracts linked to them that offer insurance against S&P 500 declines.

Continue reading article here 

-Wall Street Journal

Saturday, August 1, 2015

State treasurers to call on SEC to push for more PE transparency

A coalition of state treasurers and elected officials will soon submit a letter to the SEC calling on the regulator to push for greater transparency and fee disclosures from private equity managers.

The letter will address public pensions’ ability to track asset valuations, the reporting of profits, waterfall distributions, and other issues, said Wyoming Treasurer Mark Gordon. The letter is expected to be made public on Tuesday night or on Wednesday, July 22.

Besides Gordon, signatories include: California State Treasurer John Chiang, Rhode Island General Treasurer Seth Magaziner, Nebraska Treasurer Don Stenberg, District of Columbia Treasurer Jeffrey Barnette, New York State Comptroller Thomas DiNapoli, Virginia Treasurer Manju Ganeriwala, Vermont Treasurer Beth Pearce, New York City Comptroller Scott Stringer, Oregon Treasurer Ted Wheeler, Missouri Treasurer Clint Zweifel, and South Carolina Treasurer Curtis Loftis.

South Carolina’s Loftis said in a statement emailed to Buyouts: “Working people have the right to know what their pension funds are paying Wall Street for investment services. Too often public pension funds pay outrageous fees and expenses that rob the funds of the ability to pay retirement benefits. Standardization of fees and an increase in pension fund transparency is long overdue.”

Other signatories were unavailable for comment. The SEC was not available for comment at press time.

The SEC has zeroed in on private equity managers’ use of fees and expenses over the last year and a half, and recently fined Kohlberg Kravis Roberts & Co more than $30 million for misallocating co-investors’ broken deal expenses to its flagship fund.

The letter comes as the California Public Employees’ Retirement System and the California State Teachers’ Retirement System recently came under fire for failing to track the amount of carried interest accrued by their private equity fund managers.

However, Wyoming’s Gordon noted that CalPERS and CalSTRS did not prompt the letter. The letter was “independently generated” and was the result of a coalition of Treasurers discussing transparency issues for more than a year, he said.
By peHUB