Monday, March 24, 2008

Conference Panel: Investing in India- The Maturation Process, whats next?

The amazing panel, drawing from PE, management consulting and IB firms emphasized that they are taking a long term view of the Indian market and are doing well thought out due diligence on deals to make the best decisions for the funds. Deals have been quite competitive and negotiated.

This approach raises a line of thought regarding the non-core (?) activities of a PE fund. Why am I calling them non-core? Well, most folks would say that the only core activity for GPs is to find good investments and fund them, the rest can go for a toss. Performance is the cornerstone of success. The "official" lore is that the high performing GPs do not really have to bother much about non-core activities.

This query on capital deployment and how much GPs think about it is still worth considering as it seems to be closely tied with fund raising. The response to the query by the GPs can be that they do not really care about capital deployment as they tap into their funds on an deal by deal basis. However, I am inclined to think the GPs have a sense of what the LPs are thinking of when LPs make investments in the PE funds. Sounds like business development, doesn't it?

Anyhow, non-core or otherwise, lets dig into some aspects of the PE business. How do the GPs:
1> Handle uneven deal flow?
2> Manage different relative risk levels across deals?
3> Manage different rates of returns on their deals?
4> Set LP expectations on deal flow and deal sizes, across business environments, while still keeping LPs on board?

What do you think?

From the LP point of view, How do LPs:
1> Manage cash (e.g. lack of predictability in drawdowns)?
2> Allocate capital, from the asset allocation policy and portfolio management point of view, between drawdowns, and for drawdowns?

What do you think?

The Usual Disclaimer: This is purely a knowledge sharing resource and I have been careful to protect panelist interests. Ethically, context is everything, and I will gladly retract anything that affects the parties mentioned. Call this my mini OpenCourseWare, if you will, where Open signifies life experiences.

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