Sperling of THL Partners Talks Leveraged Loans

Scott Sperling, co-president at Thomas H. Lee Partners LP, believes that the credit markets are large enough and active enough to refinance current leveraged deals.  However, he remains “cautious” and “concerned” after the credit crisis and does not completely discount the estimated $430 billion of leveraged loans.  Many of these loans will be called in 2012-2014 but buyout firms will likely try to extend these bank maturities.  Sperling is optimistic about his buyout firm and others being able to restructure these loans, “the capacity exists within the market,” he says.  E-mail subscribers can view the following video here.

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Tags: private equity, scott sperling, scott sperling thl partners, thl partners boston private equity firm, boston private equity firms, leveraged buyout loans, leveraged loans, loans to private equity firms, loans

Costs of EU’s Directive on Alternative Fund Managers

European hedge funds are facing tough regulation and stiff taxes from the UK and European Union.  Last month, the UK announced that it will begin taxing individuals earning more £150,000 (about $247,000) a year at a rate of 51%.  This decision led many hedge funds to leave the UK for more business-friendly countries, namely Switzerland.

Now, the European Union is considering a law that will effect not only private equity and hedge funds but also EU tax revenues.  The proposed rules are estimated to cost almost $3 billion in its first year and about $1.5 billion each following year.  The Directive on Alternative Investment Fund Managers seeks to regulate and impose capital requirements on funds managing more than 100 million euros.

A significant cost may fall on the hedge funds and private equity firms which will shoulder a major burden in compliance costs.  A recent survey estimates that compliance expenses will rise by about a third from the directive. 

London, home to at least 80 percent of Europe’s estimated $400 billion in hedge-fund assets and about 60 percent of Europe’s private-equity firms, may suffer as funds decide that leaving is easier than complying with new regulations, the survey authors said.

“Thousands of jobs and millions of pounds in tax revenues could be at stake,” according to a report by Mats Persson, research director at Open Europe. “There would be little incentive for fund managers to remain in the EU at all.” The survey showed 2 percent of investors in the funds support the proposal, while 46 percent oppose it.

Britain’s Financial Services Authority last week organized a one-day conference in London about the costs and consequences of the directive, which Paul Myners, the U.K. treasury minister called “flawed.” Poul Nyrup Rasmussen, the Danish former prime minister whose Socialist Party president introduced the legislation, said this month that the proposal may need “tightening.” source

Read about the UK Hedge Funds Tax

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Tags: Directive on Alternative Fund Managers, Directive on Alternative investment Fund Managers, eu hedge fund regulation, european union, hedge funds, private equity, uk tax laws, investments

4 More Firms Settle in Placement Agent Pay to Play Scandal

The use of placement agents has come under fire following a public investigation into the practice and investigations into whether a pay-to-play scheme is used in attracting capital from pension funds.  The most recent development is that New York Attorney General Anthony Cuomo’s investigation into pay-to-play arrangements between the state’s pension fund and placement agents for private equity firms has forced four more firms to settle.  Reforming the current system has been met with some resistance especially from firms who argue that outlawing the use of placement agents puts smaller and new private equity firms at a significant disadvantage in raising capital.

The four private equity firms are: Access Capital Partners, Falconhead Capital, HM Capital Partners and Levine Leichtman Capital Partners.  Each has agreed to adopt the rules proposed by Mr. Cuomo barring the use of placement agents to attract funding from pension funds.  Additionally, each firm will pay a total $4.5 million in damages.  Carlyle Group and Riverstone Holdings already settled with the Attorney General. 

“With seven firms now having signed our code of conduct, momentum is building in the industry to make our code the national standard to eliminate pay-to-play in public pension funds across the country,” Cuomo said.

Six people have been indicted so far in the scandal at the New York State Common Retirement Fund. Two have pleaded guilty for their role in the scheme which paid kickbacks to a pair of top aides to former New York Comptroller Alan Hevesi, whose office oversees the Common Retirement Fund.

HM Capital and Falconhead both employed a firm run by a key Hevesi aide indicted in the scandal, Hank Morris, while Access and Levine Leichtman unknowingly hired firms that split fees with Morris. Access had hired Barrett Wissman, who has pleaded guilty for his role in the pay-to-play scheme, who in turn allegedly paid off Morris to win the firm business.  Source

Meanwhile, the SEC’s proposed guidelines that aim to clean up the pay-to-play system may have a very damaging effect on new and smaller private equity firms.  The current system (ethical, or not) enables small and newly launched private equity firms to net capital from investors that it otherwise probably would not have access to.  The big buyout shops are able to use name recognition and a proven track record to entice investors without the need of placement agents, although some big firms use them anyway.

Without using such agents, small and new funds will have a tougher time raising money, critics say. While large, established firms are well known enough to simply contact a pension fund directly, smaller funds without a brand or history have a far tougher job getting heard.  “I think the proposal’s a bit draconian, particularly on banning placement agents,” said Steven Kaplan, a professor of finance at the University of Chicago.

Supporters of the placement agent industry — which includes brand name firms such as Credit Suisse’s (CSGN.VX) placement agent unit and Blackstone Group’s (BX.N) Park Hill Group — argue that their role has no similarity with political fixers, and they should not be tarred with the same brush.  Source

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Tags: placement agents, new york, rules, anthony cuomo, attorney general, private equity, buyouts, placement agents pension funds, new york pension probe, placement of pension funds, pay to play scandal

Private Equity Real Estate Tips for Success

One of the most common requests I receive from readers is to cover private equity real estate in more detail. There is a great deal of information on real estate and private equity but very little on private equity real estate funds. I am working to fill this void so if you have any white papers, articles, videos or personal insight please contact me at Theo@peblogger.com I came across this document on private equity real estate funds. The author, Deloitte, prescribes five areas to focus on to achieve success in private equity real estate.

Attracting capital

• Build and sustain an exceptional investment yield track record.
• Build and maintain an eminent and well-regarded team of advisors, including bankers, accountants, lawyers, and other specialists.
• Obtain access to qualified investors.
• Make sure that satisfied and loyal investors receive timely and effective communications, including financial and tax reports.
• Establish, promote, and protect a brand that exudes quality, skill, and integrity.

Sourcing and qualifying investment opportunities

• Do the right things to make people want to do business with you: Demonstrate that you understand the important issues, you conduct due diligence effectively and efficiently, and you have credibility to close.
• Build an extensive network of joint venture partners who are trustworthy and skillful.

Fund and investment structuring

• Structure investments that are suitable, attractive, and efficient for domestic individuals, tax exempt institutions, and a variety of foreign investor profiles.
• Establish best practice fee structures that align your interests with those of your investors.
• Determine the right degree of leverage on investments and for the fund overall.
• Structure investments to minimize federal, state, and foreign income, and asset & transfer tax costs, thereby providing optimal after-tax yield to investors and you.

Investor reporting and operational excellence

• Develop and operate properties efficiently and effectively.
• Build and retain a skilled team at the advisor level.
• Comply with all financial and tax regulatory matters in a timely fashion.

Exit strategies

• If desired, effectively recycle capital within a fund.
• Correctly gauge ideal timing for closing a fund and starting a new one with the same investor group.

Source

The preceding advice is from Deloitte and is not necessarily suggestions from this website, please see a qualified legal consultant.

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When Government Policies Effect Private Equity

In the aftermath of the financial crisis, federal and state legislators and regulators have been considering ways to monitor the private equity, venture capital and hedge fund industries. I just spent a week in Washington, D.C. and streets and buildings around the Capital were crowded with lobbyists and policy-makers working to push legislation through. While all these bills do not specifically concern private equity firms, many affect their portfolio companies and the industries they compete in.

With President Obama in the White House and the Democratic majority in Congress, private equity firms are bracing for major changes in areas outside of finance such as labor unions, health care, economic policy and energy. Changes on any of these fronts will inevitably effect some private equity firms and the companies they are invested in, according to panelists at a recent Private Equity Analyst Conference.

In economic policy, the recovery of the financial system and the stimulus packages are important in reviving consumption in portfolio companies from retail to manufacturers. The drastic revamping of the health care industry could have significant effects on the medical and bio firms that venture capital firms hold. The energy sector may benefit from a Democratic government hoping to “go green” and give some of these environmental startups a chance. With Obama and Congress taking on so many issues in the last few months, private equity firms and venture capitalists are unsure of what to expect.

“Policy does impact the bottom line of portfolio companies,” said Mark Heesen, president of the National Venture Capital Association. He added that venture investors have been moving more heavily to doing deals in life sciences and clean technology, both areas that are heavily regulated.

Private-equity firms are also intently focused on broad financial system reform, even the portions of it that don’t appear directly related to their business. Bryan Corbett, a principal with the Carlyle Group, mentioned as one example the impact that higher reserve requirements at banks are likely to have on private-equity firms.

Speakers were also concerned about the regulation that is specifically targeting the private-equity industry, especially legislation that would require all private-equity and venture capital managers to register with the Securities and Exchange Commission, and new proposed rules that might ban the use of placement agents in soliciting capital from public pension funds. Source

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Tags: private equity, private equity policy, venture capital, government policy, venture capital association, concerns, government regulation of private equity, government regulation buyouts

5 Tips for Networking at Private Equity Events

If you’re looking to enter the private equity industry either working directly for a buyout firm or as a service provider to one, networking events and conferences are a great way to get your foot in the door. On September 17th, private equity professionals can enjoy breakfast in New York City with one of Blackstone Group’s founders, Peter G. Peterson. For more information on this event, see this article or e-mail aengel@argyleforum.com. And for those interested in the hedge fund industry such as fund service providers, Hedge Fund Premium is hosting a free event for members in Chicago. For more information see this website. Whether you are attending these events or not, this article will give you some advice on attending networking events and investment conferences.

Many professionals fail to take advantage of these opportunities, even those who attend. Here are 5 tips that should prepare you for attending a networking event or conference:

1. Don’t Be Shy: it’s a good start to attend a private equity event but you do not gain anything if you do not talk to other attendees, speakers and sponsors. The event is only valuable if you make it valuable, so network and socialize with those around you.
2. Don’t Scare People Off: Another mistake is to be too forward when approaching managers or service providers, especially those looking to land a job in private equity. Instead of sharing insights and thoughts on the industry, many young professionals will focus entirely on their own needs (a job) and ignore those managers or executives that are not currently hiring. This is the wrong mentality. Assuming you have been following the industry and paid good attention to the speaker, you will have a good starting point for initiating a conversation. Ask questions when appropriate and listen when the other person is speaking. If you are looking for a job, don’t start a conversation with that problem. Those who work in the industry are not paying to hear someone complain about not working in private equity. But you should mention it if the timing is appropriate.
3. Get Your Name Out There: If you cannot find a hiring firm or no firms are interested in your product or service, don’t despair, get your name out there. It may just be an inconvenient moment or the person you are talking with is not the right person at the firm; for example, if you are marketing your auditing service to a principle in charge of evaluating deals, he may not be interested. Give him your business card regardless, in a quarter the firm may be looking for a new auditor and still have your card. Even if you do not directly land a client through this method, it boosts your firm or your own name recognition. If you’re looking for a job (from analyst to executives) give your card out, when the firm is eventually hiring they will probably have your name on file.
4. Prepare an Elevator Pitch: It may not sound great, but you are a product that needs to be sold. Therefore you need to have a great elevator pitch that comes out effortlessly. Whether you are looking to network, marketing to investors or job seeking, a solid elevator pitch is necessary. Be concise and include only essential information. To learn more about crafting a great elevator pitch see these articles, Developing an Elevator Pitch and Elevator Pitch Essentials (also the title of a helpful book on the subject).
5. Look and Act like a Professional: Even though you are not at work when you’re attending an event or conference, act like you are. You are meeting potential clients and partners, so you essentially are working. Wear a suit and if it’s hot, as many crowded events are, at least make the initial effort and take off your coat once you sit down. Your mother was right, first impressions are very important. So, look your best (haircut, shave and a suit) or no one will take you seriously. It’s better to be overdressed than underdressed. Remember your manners, especially if it is catered event and use language that you would be comfortable using in the office.

Information on a September 17th private equity event in NYC
Tips for writing a solid elevator pitch here.

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Tags: 5 tips for networking, five networking tips, advice to network, private equity, buyout events, private equity events, hedge fund networking, events finance, conference networking

Private Equity Service Provider Jobs

I receive many e-mails each month from professionals interested in working in private equity. They are hardly ever searching for a position outside of a private equity firm, as a service provider. This is not really surprising considering the great compensation and benefits from working for a private equity firm, but a service provider career can be just as rewarding. You miss out on some great job opportunities by strictly limiting your career search to the typical positions within a buyout firm such as analyst, associate or junior portfolio manager.

While some service provider jobs may seem less glorious than working directly for a private equity firm, there are great career opportunities for someone who has experience in fields that may not fit exactly into private equity. For example, an accountant may have an interest in private equity but has no experience in raising capital, investor relations, finding and executing deals or any other part of the buyout process. While he may have a tough time finding employment in a private equity, he could be taken on as a specialized alternative assets auditor. This offers competitive compensation and a chance to work one on one with buyout firms because service providers work with multi-million dollar and even billion dollar clients.

Attorneys, third-party and fund-of-fund marketers, fund administration and IT technology service providers can also work in the private equity industry. By taking the less traveled route, career professionals can land high-paying and rewarding jobs in private equity.

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• Auditors & Accounting Services
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Tags: Private equity, private equity service provider, private equity service provider jobs, private equity services, private equity careers, private equity jobs

Based on the Alexa Traffic Ranking Tool here are the top 5 Hedge Fund Website Rankings:

1. HedgeFundBlogger.com, Alexa: 122,000
2. HedgeCo.net, Alexa: 140,000
3. Albourne Village: 240,000
4. HedgeWorld: 455,000
5. HedgeFund.net: 539,000

One way to judge popularity of a website is through it’s Alexa Traffic Ranking, the smaller the ranking the more traffic the website gets. Websites like Amazon.com and Google have rankings of #7 and #1 while typical blogs rank anywhere from #50,000 to #900,000.

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Below is a video on hedge funds. While parts of the video are good, generalizations are made about the industry which I do not believe are true. All hedge fund managers do not “hedge” and many are not “adventurous.” Hope this is helpful. Also, there are many more rules that hedge funds typically must follow, this video makes the process sound more simple than it really is.

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If you are looking to learn more about Private Equity as an investment, career or for prospects for your small business please refer to PrivateEquityBlogger.com. This is a blog ran by the H Media Group and it contains over 500 unique articles, videos, interviews, book reviews and Q & A pieces on private equity. Here are links to their top 50 resources:

1. Private Equity Jobs and Careers
2. Private Equity Videos
3. Alternative Investment Jobs
4. Private Equity Tracker Tool
5. Service Providers
   
6. Private Equity Book
7. Private Equity Associate
8. Private Equity Industry
9. Private Equity Directory Listings
10. Hedge Fund List
11. Private Equity and Hedge Funds
12. Private Equity MBA
13. Private Equity Real Estate List
14. Private Equity Conference
15. Private Equity Real Estate
16. Private Equity Forum
17. Access PEBlogger.com Archives
18. Resume writing
19. Private equity partner
20. Venture Capital Associate
21. Private Equity Positions
22. Private Equity Job Database
23. 3i Group PLC
24. Admiral Capital Group
25. Apollo Management
26. AXA Private Equity
27. Baring Private Equity
28. The Carlyle Group
29. Goldman Sachs Capital Partners
30. Leonard Green & Partners
31. KKR Private Equity
32. The Future of Venture Capital
33. Private Equity in Africa
34. Angel Investing Video Part 1
35. Angel Investing Video Part 2
36. Angel Investing Video Part 3
37. Private Equity in China
38. Venture Capital Bloggers Video
39. Raising Venture Capital Video
40. Private Equity Boom
41. Private Equity Real Estate Video
42. Middle East World Economic Forum Discussing Private Equity 2007
43. General Partner Fees
44. Independent Directors for Private Equity Funds
45. Private Equity in Brazil
46. Private Equity Activity 2009
47. FDIC Private Equity
48. Mechanical Trading Systems by Richard Weissman
49. Sri Lanka Investments
50. Michael Jackson Private Equity

Tags: private equity, private equity industry, private equity blog, blog on private equity, private equity articles, private equity resources, private equity book, private equity author