Connect with us

Sponsor Content

Understanding Private Equity: The Asset Class You Can No Longer Ignore

Published

on

frankfurt_privateequity_lscape2

This article is sponsored by The Wharton School.

With market uncertainties growing, many investors and their advisors are taking a closer look at private equity. In fact, this asset class is now attracting a sizeable segment of the economy, and it has an ecosystem that includes not only private equity firms, but banks that cover their debt, individual investors, and companies looking to sell or being approached for a sale.

“No one needed to understand private equity 30 years ago,” says Wharton private equity professor and director of the school’s Alternative Investments Initiative Bilge Yilmaz. “But today, you can no longer ignore it. Private equity has evolved from deal-making by the ultra-wealthy to an investment option for individuals.” Yilmaz says that with so many people now involved, the bidding can be intense — and the chance of making a costly mistake is great. “You need to be able to see value where others can’t, and understand how a deal is put together. If you’re an investor, you will inevitably have to compete with others, so your ability to do good sourcing and due diligence is key.”

Yilmaz has been teaching private equity to Wharton MBA students for many years, providing them an edge that they can put to use in their first deal. Now, he is bringing the same innovative curriculum to an open-enrollment course for business executives in the four-day program Private Equity: Investing and Creating Value.

“We will help participants gain exposure to the strategies that private equity firms use to structure and finance a deal and create value for their investors. They will understand the key drivers in private equity and gain confidence in evaluating investment opportunities,” he says. In addition to best practices in and tools for structuring a deal, sessions on due diligence, debt negotiations, and exit strategies will show participants how to get maximum value from their investments.

“You need to experience the life of a deal to appreciate the knowledge and strategies that go into it.” Bilge Yilmaz, PhD, Wharton Private Equity Professor, Professor of Finance, The Wharton School

Yilmaz will be joined by other finance faculty and Wharton alumni who are leaders in many areas of the private equity industry. They will share their experiences and discuss their views on the private equity landscape. Outside the classroom, participants will work on deal proposals in small groups, applying what they have learned, using as reference a recent private equity deal. They will apply the tools that private equity firms use to structure and finance a deal, and show how it will create value. “This is the best way to learn,” says Yilmaz. “You need to experience the life of a deal to appreciate the knowledge and strategies that go into it. I want participants to be able to articulate why they want to own this business.”

A deal proposal will be presented to a panel of faculty and alumni who will provide real-time feedback at the end of the program. “This is not just an exercise,” say Yilmaz. “It’s a reality check on what you have learned in the program, how well you can apply it, and what you can do to improve.”

 
 
 
 

Sponsor Content

The Slings and Arrows of Passive Fortune

Published

on

This article is sponsored by S&P DJI.

If a tale were to be written regaling us with the popular exploits of the modern day active manager in his quest for alpha across the many peaks and valleys of the financial world, passive investment would likely feature prominently in the telling. Passively managed assets have grown tremendously since their introduction in the 1970s to command some 20% of the U.S. stock’s market total-float adjusted capitalization, drawing a deluge of criticism in recent years from proponents of a more traditional, active approach who charge indexers with all manner of supposed ills – from encouraging collusive behavior and exacerbating pricing inefficiencies, to indifference on matters of corporate governance.

But are passive assets and their purveyors really the threat to markets that active management makes them out to be? Or are the problems attributed to their rise merely a reflection of the market forces all participants must face? These are the questions posed by Anu Ganti and Craig Lazzara at S&P Dow Jones Indices (S&P DJI) in their new paper, titled “The Slings and Arrows of Passive Fortune,” which seeks to unravel some of the most pervasive myths surrounding the growing role of index funds, highlight the immense value they bring to asset owners, and posits a future of asymmetric equilibrium between the old and the new that puts each in their proper place based on relative – rather than absolute – performance.

Nobody – including the paper’s authors – denies that index-based investment has made life more challenging for active managers, who count alpha as their very lifeblood; but so too would it be foolish to argue its advancement as one of the most important developments in modern financial history is without merit, or somehow Thucydidean in nature. If anything, active management can and should expect its portion of the pie (which, it must be pointed out, constitutes the majority of assets by a wide margin) to remain subject to nibbles from their passive counterparts – nibbles that may, with time, diminish. The market always has room for more players at the table, after all, and we all play by its rules.

As Director and Managing Director of index investment strategy team at S&P DJI, Ganti and Lazzara provide research and commentary on the firm’s entire product set – covering U.S. and global equities, commodities, fixed income, and economic indices. Both are chartered financial analysts and regular contributors to Indexology, S&P DJI’s appropriately named blog covering developments in the world of indexing.

Continue Reading

Sponsor Content

Battea: 2017 Securities Class Action Industry Lookback and Observations

Published

on

This article is sponsored by Battea.

Source: Battea

There has been incredible growth in securities and antitrust class action litigations and settlements, particularly as they have unfolded in 2016 and 2017. The number of new cases and settlements from traditional securities litigation to antitrust rate rigging, spread inflation and other forms of collusion are at an all time high and shows no signs of slowing down.

With several multi-billion dollar litigations related to Libor, Euribor and Tibor rates, and spread manipulations, the securities, foreign exchange and antitrust class and collective actions litigation space rose exponentially in 2017.

View Whitepaper Here

Continue Reading

Sponsor Content

The Future of Operations: Simplify, Innovate and Transform

Published

on

This article is sponsored by Broadridge.

Now that the pain of the global financial crisis and subsequent regulations are starting to fade from view, the asset management industry is facing new challenges that will transform the business. Firms must be nimble enough to support this evolution. That means not only redesigning operations, but also adopting new technologies that can be used for innovation in-house and with the help of partners.

In active management, the industry has created more complex products to generate alpha, while the growth of passive management, spurred by fintech competition, is compressing fees. At the same time, expansion into new markets has added costs. Facing these challenges will require serious improvements to back- and middle-office operations — an overhaul of everything from data validation to trade reconciliation.

For this type of transformation, experts say, it’s not enough to improve the steps in a process. Financial institutions need to eliminate steps. Specifically, executive members of the Asset Management Group of the Securities Industry and Financial Markets Association (SIFMA) say that leading firms should:

Work collaboratively. Firms should collaborate to solve common problems; use associations to identify and promote best practices; and partner with service providers, utilities and regulators to tap their specialized skills and mutualize non-differentiating functions.

Tackle common pain points. Many of the industry’s biggest challenges come from a lack of standardized processes: Standardizing data is the top challenge and sets a foundation to accelerate change.

Leverage transformational technology. Cloud computing, artificial intelligence, and distributed ledger technology can be transformational over the coming three, five or 10 years — but investing now is vital.

Assess, accept and mitigate risks. During times of large transformational change, it should be understood that risks are higher. This traditionally risk-adverse industry must balance the need for bold change against the fear of producing subpar outcomes.

This paper asks how asset managers can move beyond incremental improvements, like shaving costs from processes like post-trade settlement, regulatory compliance and reconciliation, to reimagining how operations are handled. Based on discussions with executives from leading asset management, buy-side, and sell-side firms, as well as service providers, it assesses the drivers for change and the challenges and opportunities ahead, and discusses what actions the industry must take to reach its desired future state.

The long-term vision of how asset management operations should change is best summed up by one word: Simplify.

To learn more about “The Future of Operations” for the asset management industry, download the white paper from Broadridge and the SIFMA Asset Management Group.

To learn more about Broadridge’s solutions for the asset management industry, please visit www.broadridge.com/financial-services/asset-management/

Continue Reading

Popular

© 2008-2018 Sovereign Wealth Fund Institute. All Rights Reserved. Sovereign Wealth Fund Institute ® and SWFI® are registered trademarks of the Sovereign Wealth Fund Institute. Other third-party content, logos and trademarks are owned by their perspective entities and used for informational purposes only. No affiliation or endorsement, express or implied, is provided by their use. All material subject to strictly enforced copyright laws. Registration on or use of this site constitutes acceptance of our terms of use agreement which includes our privacy policy. Sovereign Wealth Fund Institute (SWFI) is a global organization designed to study sovereign wealth funds, pensions, endowments, superannuation funds, family offices, central banks and other long-term institutional investors in the areas of investing, asset allocation, risk, governance, economics, policy, trade and other relevant issues. SWFI facilitates sovereign fund, pension, endowment, superannuation fund and central bank events around the world. SWFI is a minority-owned organization.