Private Equity Thesis help

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Hi there, Im a final year student preparing my thesis proposal. After reading up on private equity investment performance, I would like to do my thesis on this (possibly) in a south african context, and was wondering if you could reccomend any readings on this in order for me to construct a good research question/proposal.  

My only worry with a topic like this is access to emperical data. Would this be an issue?

Thanks, 

Rahulptl

Some of the data for your questions might already be available at third party companies that compiles statistics for fund-raising and such... check out http://www.preqin.com/ and others. Checking out what's already there in secondary sources will help you refine your primary research/survey. Do a quick literature review to see what data you have access to.

Maybe you would like to focus on key issues: - Succession planning / management: Are they founder managed? How has this changed since the firm started? Succession planning and management retention is a key issue for PE firms. - LP base & Fund-raising: Breakdown of their LP base (who'd money do they invest?) and how that has changed from the past and if they will look to other types of investors. To what extent do they use external parties / placement agents and to what extent do they use an internal team to raise funds. - Jurisdiction / taxation: Where are they based / their funds based? What are their views on potential changes in taxation? how have they been affected by changes in taxation?... etc...

Sounds a little or a lot vague to be honest. Why not pick a specific industry that interests you and discuss the opportunities for investment in that landscape and how they have changed or are changing? Not sure your school but I was required to be much more specific on my thesis than that.

Look at what ranieri partners is up to. Then Blackstone. Check out some REITS like sl green and arcadia. Then make some conclusions.

Something on the difference (if there is one) between how firms value and acquire commercial vs residential (single family) deals could be interesting since single family is getting hot in the REPE world. Markets they look at, metrics they use, how they find/choose and exit deals and that sort of thing. Since single family deals are so much smaller in nominal dollars compared to commercial, it may be interesting to research how firms can even find and manage enough properties to deploy billions of dollars into the market without going insane.

Thanks guys for the tips. My university wants me to write a paper, which is sort of academic, with testing some theory in the best case and that makes it hard, when applied to REPE, as the data for any reasonable regression are just not existing. So far, I was thinking about the following research fields: - current problems with financing REPE and its impact on the deal structure on the LPs side - impact of AIFMD (European version of Dodd-Frank) on the opportunity funds - What investment vehicles are the most widely used in German REPE - Separation of the LPs into High-net-worth individuals and institutional investors. Examination, whether these types of investors are treated the same way - the testing of the multitasking theory, when the sponsor runs more funds at the same time - the impact of the deal structure (Tax optimisation, investment vehicle, legal structure) on the performance and investment strategy of the fund - capital structure under the Pecking order theory

Any comments/ideas/improvements on these topics?

Thanks

Pivo

No Comment on this???

I'm doing an honours year in 2014 and was thinking along the same lines for my thesis - a PE/HF/IB topic so I could develop an in-depth understanding of the industry I want to work in while completing the thesis.

Perhaps PE correlation with the market? I like idea number 2, find where top growth caused by PE has occurred across the world then apply the economics/politics/legal framework of these countries to explaining why PE has been successful.

All the best.

You should do a report on PE firms operating in the lower middle market, separating out different groups by the size and types of businesses they invest in. The data might be impossible to get, but it would be an interesting topic. The typical private equity model for the lower middle market is tough, since companies with 10-100 million in revenue take longer time periods to grow, and thus, force a lot of shops to exit early on their investments to generate IRR (and due to fund life). Also, finding good businesses for sale in this particular market is not the easiest thing to do. If your investments for, say, Fund I don't pan out, good luck raising Fund II.

As a result of the above, a lot of shops are shifting away from the fund model and coming up with more lucrative and sensible methods for funding transactions in the lower middle market. The firm I work for is one of these. Some of the structures are extremely complicated and every one is different, but it definitely makes more sense to do deals this way in this area, at least in my opinion.

Not too many people are familiar with these types of acquisition models so I think it might be a cool topic for you. I am also partial to it since I am familiar with how it works.

It would be interesting if someone measured to actual volatility of a Class A diversified portfolio of multifamily vs office vs retail vs hotels. Or the volatility of suburban product vs urban core.

I'm scheduled to do mine in about 18 months or so. I'm going to challenge the consensus and see if it's correct. My hypothesis is that government intervention in the housing market via Fannie/Freddie, FHA, and VA is counterproductive for the goal of creating more affordable ownership housing and then I'm going to test that hypothesis.

Maybe challenge the common wisdom--say, look into REPE returns and see how they really perform on a risk-adjusted basis.

I think further research on Tobin's Q extending on Hans Nordy's research would be interesting. http://www.iijournals.com/doi/abs/10.3905/jpm.2013.39.5.076

Providing practical tools for the industry extending on very theoretical research is always nice. Tony Feng's attribution model, where he provides a real life or practical manner in which firms could track IRR attribution based on Geltners research is interesting.

Does it have to be PE or VC related? I always thought behavioral finance was interesting - finding abnormal market returns on certain days of the week, days with good/bad weather, days after sporting events, etc. Phenomenal stuff.

I think PE or VC is always a difficult topic for a master thesis which usually only has 6-12 months of preparation. The reason is that data is usually very difficult to obtain and often biased or faulty (for quantiative topics). Alternatively, you need direct access to a fund which is difficult to establish in that time frame (more qualitative research). If you want to pursue it nonetheless, I think the question whether PE/VC is a better governance model than public equity is an interesting but not necessarily a new topic.

I thought this was an interesting question on VC fund vintage performance relative to market cycle:

http://www.wallstreetoasis.com/forums/when-are-vc-funds-most-sensitive-…

I provided my take, but you could do it with actual data.