New Sector Thesis Development
Any general tips / best practices to follow when trying to find sectors for your fund to invest in? I’m mostly focused on the sector identification process (and how to not end up just boiling the ocean). Realize banker/consultant/expert calls, looking at new deals, etc. will help but I want to build my knowledge base before starting those calls so I don’t come off as an absolute numbskull. Reading equity research, primers, sector newsletters might help but figured I’d ask the community to see if there’s anything else they would recommend. Thank you.
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The whole point of expert calls is to ask idiotic questions in a safe space. A 45 minute call with an expert is usually enough to get a solid basis for understanding the market structure, and can turbo charge your investigation of specific sub-elements of the overall value chain. Personally, I would recommend spending no more than 30 minutes figuring out relevant companies in the space, then getting an expert call set up and using that to develop a broad view of the market layout, then figure out the right rabbit holes from there.
While I agree this is good advice, something I should have clarified earlier is that my firm is pretty cheap and that I can’t take expert calls freely (i.e., have to be expensed to a specific deal). Might be able to try connecting with some equity research analysts who cover the public stocks in the spaces I’m interested in though.
Gotcha. Then yeah, your best bet is probably going to be leveraging a few sources:
For what it's worth, I wouldn't go nuts on this, but it's probably worth at least creating a few waves about your firm's expert call policy. The whole point of working in private equity is to come up with good ideas for industries and companies to invest in, and expert calls are an extremely valuable resource. Unless you're at a $100m fund, it's a bit crazy that you can't do any calls to build general industry knowledge.
A few other sources:
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