Financials Coverage Group Tommy Fan Bill Kwai

Transcript:Financials Coverage Group Tommy Fan Bill Kwai:
Financials Coverage Group Tommy Fan Bill Kwai Maurice Ang Nick LaGrandeur Colin Man David Lopez Nick Burakoff Sai Senthilkumar Habib Olapade Sophia Huard Andrea Wang Alex Mack Hedge Funds “Hedge Fund” is an umbrella term for a diverse industry comprised of funds with vastly different strategies and sizes Compensation performance based “2 and 20” 2% total asset value (AUM) as management fee 20% of profits earned (alpha) Managing billions of dollars + High returns = Fund managers making tons of $$$$$$$$ Fund Strategies Aggressive Growth Distressed Securities Emerging Markets Income Macro Market Neutral Market Timing Green = Low Risk Orange = Medium Risk Red = High Risk Short Selling Special Situations Value Private Equity - Overview Private equity is an asset class for investing in public and non-public companies or physical assets, such as real estate. PE firms seek to invest directly in private companies or acquire private/public companies and capitalize on the investments by selling the company later Investments are less liquid and seek exit after 3-5 years. Fee structures typically consist of a yearly 2% management fee and 20% of gross profits upon sale of the company (2 and 20 structure). Current State Private Equity fundamentals have been steadily strengthening since the global financial crisis. High asset prices and stiff competition from a new breed of investors, including sovereign wealth funds, state-owned enterprises, pension plans, specialist funds and large family offices pose obstacles to new deals. Such investors are now managing their own investment portfolios and buying companies directly to avoid private equity fees. Current State - Continued Deals and Exits 2013 saw a record number of private equity-backed buyout exits, with 1,348 such exits valued at $303bn witnessed. 2013 also saw a record year for venture capital exits, with 798 recorded throughout the year, the highest number of exits in the period since 2007. Sector Trends PE firms starting to target retail investors for capital growth KKR, Blackstone, Carlyle open up to investors putting up less than $1 million Coupled with increasing high net worth PE allocation (>23%) Rise of high-performing, sector-focused PE funds Cambridge Associate Report 2001-2010: 2.2x multiple on invested capital (MOIC) and 23.2% IRR as opposed to 1.9x MOIC and 17.55% IRR by generalist funds Middle/lower market challengers: <$500 million under management have outperformed >$500 million in past six years Record high equity valuations, cheap debt = highly leveraged buyouts (>70% debt multiple) Fear