Private Equity

[S87]

Hi Guys,

I was wondering if anyone could explain me the difference between a PE fund purchasing and a PE fund lending.

Moreover, @Jaysen is there any other course about PE?

Thank you very much for your help

 

[Jaysen]

Hi Guys,

I was wondering if anyone could explain me the difference between a PE fund purchasing and a PE fund lending.

Moreover, @Jaysen is there any other course about PE?

Thank you very much for your help

You may find this article helpful: https://www.bloomberg.com/news/arti...-soared-to-fuel-private-equity-boom-quicktake.

I've written up quite a detailed guide to private equity within the TCLA's Weekly Report and Interview Guides course: https://classes.thecorporatelawacademy.com/courses/779735.

You can also check out Phil Sanderson's free lecture here: https://classes.thecorporatelawacademy.com/p/partner-led-training.

Hope that helps!

 

[S87]

You may find this article helpful: https://www.bloomberg.com/news/arti...-soared-to-fuel-private-equity-boom-quicktake.

I've written up quite a detailed guide to private equity within the TCLA's Weekly Report and Interview Guides course: https://classes.thecorporatelawacademy.com/courses/779735.

You can also check out Phil Sanderson's free lecture here: https://classes.thecorporatelawacademy.com/p/partner-led-training.

Hope that helps!

Thank you so much!!

 

[Daniel Boden]

Thank you so much!!

I also recently did a PE course on Coursera which was really good and would thoroughly recommend it!

When you say purchasing and lending, do you mean the difference between a PE debt fund and a PE equity fund?

 

[S87]

I also recently did a PE course on Coursera which was really good and would thoroughly recommend it!

When you say purchasing and lending, do you mean the difference between a PE debt fund and a PE equity fund?

Are you doing the Bocconi course? I enrolled yesterday.

I am reading recent news (https://www.ft.com/content/ab3a441b-8f73-40ac-833c5f0eba649d92,https://www.sportspromedia.com/news/serie-a-cvc-capital-blackstone-investment-talks ) about CVC and Blackstone wanting to invest in the Italian Football Serie A. Now the two investments are different because CVC wants to acquire a 20% stake and continue with its tradition with sports (after formula1), whereas Blackstone wants to lend the money.
So what's more profitable in the long run and how the two funds differentiate from one another?

 

[Daniel Boden]

Are you doing the Bocconi course? I enrolled yesterday.

I am reading recent news (https://www.ft.com/content/ab3a441b-8f73-40ac-833c5f0eba649d92,https://www.sportspromedia.com/news/serie-a-cvc-capital-blackstone-investment-talks ) about CVC and Blackstone wanting to invest in the Italian Football Serie A. Now the two investments are different because CVC wants to acquire a 20% stake and continue with its tradition with sports (after formula1), whereas Blackstone wants to lend the money.
So what's more profitable in the long run and how the two funds differentiate from one another?

Yeah I finished the Bocconi course last week! Ah I see yeah I read that article too!

So CVC has raised a normal closed-end fund and are using the money raised from that to purchase various stakes in companies that they think they can add value to and then sell for a profit later on (in this case the 20% stake in Serie A).

Blackstone has raised a debt fund and is proposing to use some of this money raised and loan it to clubs in the Serie A. Debt funds are a relatively new financial product and they generate returns from their investors' money by investing in bonds or deposits i.e. they lend the money and earn interest on the money they have lent which forms the basis for the returns they generate for investors.

Otherwise, debt funds and more usual close-ended funds are structured in exactly the same way, the only difference is that the debt fund invests in private debt rather than equities.

In terms of profitability, that's a hard question to answer. You could argue that a debt fund offers a less risky return on investment because bonds are generally a very stable asset, and if interest rates rise, then they generate an even greater return for the investor. However, obviously, if interest rates fall then the opposite is true.

However, investing in equity has the potential to be incredibly profitable because, if the private equity firm is able to add value through the ways you will learn about through the Bocconi course, then it can generate a significant return on investment. Conversely, if the fund's investment does badly then that could have a much more damaging impact than a fall in interest rates.

So as an investor, I would say it all depends on your appetite for risk and obviously what the PE firm's track record is.

I hope that makes sense!

 

[S87]

Wow such a detailed answer.

It is all very clear and I do not know how to thank you!!

Yeah I finished the Bocconi course last week! Ah I see yeah I read that article too!

So CVC have raised a normal closed-end fund and are using the money raised from that to purchase various stakes in companies that they think they can add value to and then sell for a profit later on (in this case the 20% stake in Serie A).

Blackstone have raised a debt fund and are proposing to use some of this money raised and loan it to clubs in the Serie A. Debt funds are a relatively new financial product and they generate returns from their investors' money by investing in bonds or deposits i.e. they lend the money and earn interest on the money they have lent which forms the basis for the returns they generate for investors.

Otherwise, debt funds and more usual close-ended funds are exactly structured in the same way, the only difference is that the debt fund invests in private debt rather than equities.

In terms of profitability, that's a hard question to answer. You could argue that a debt fund offers a less risky return on investment because bonds are generally a very stable asset, and if interest rates rise, then they generate an even greater return for the investor. However, obviously, if interest rates fall then the opposite is true.

However, investing in equity has the potential to be incredibly profitable because, if the private equity firm is able to add value through the ways you will learn about through the Bocconi course, then it can generate a significant return on investment. Conversely, if the fund's investment does badly then that could have a much more damaging impact than a fall in interest rates.

So as an investor, I would say it all depends on your appetite for risk and obviously what the PE firm's track record.

I hope that makes sense!

 

[Daniel Boden]

Wow such a detailed answer.

It is all very clear and I do not know how to thank you!!

A pleasure! Glad that's helped and it's good for me to check my understanding haha - let me know what you think of the Bocconi course!

 

[Romiras]

Are you doing the Bocconi course? I enrolled yesterday.

I am reading recent news (https://www.ft.com/content/ab3a441b-8f73-40ac-833c5f0eba649d92,https://www.sportspromedia.com/news/serie-a-cvc-capital-blackstone-investment-talks ) about CVC and Blackstone wanting to invest in the Italian Football Serie A. Now the two investments are different because CVC wants to acquire a 20% stake and continue with its tradition with sports (after formula1), whereas Blackstone wants to lend the money.
So what's more profitable in the long run and how the two funds differentiate from one another?

The typical buyout / equity stake model is more profitable. It tends to attract around 10% to 20% IRR, however it comes with higher risks. Debt funds are a less common practice amongst PE funds, but Blackstone is one of the few funds that have historically set up both typical equity investment funds alongside debt investment funds.

Debt funds operate like a bank's lending arm. However they're much leaner and do not have the same monitoring and administrative features.

 

[S87]

The typical buyout / equity stake model is more profitable. It tends to attract around 10% to 20% IRR, however it comes with higher risks. Debt funds are a less common practice amongst PE funds, but Blackstone is one of the few funds that have historically set up both typical equity investment funds alongside debt investment funds.

Debt funds operate like a bank's lending arm. However they're much leaner and do not have the same monitoring and administrative features.

Thank you for this additional explanation.
Do you happen to have applied to Sidley Austin?

 

[Romiras]

Thank you for this additional explanation.
Do you happen to have applied to Sidley Austin?

Yes, about 2-3 years ago.

 

[S87]

Yes, about 2-3 years ago.

Do you mind if I message you in private?

 

[Romiras]

Do you mind if I message you in private?

Sure.