PE FoF - Fund Investment Case Study

For a PE Fund of Funds (FoF) interview, especially one that involves Primary, Secondary, and Co-Investments, here’s what you need to focus on:

1. Understand the FoF Structure

• Review the split between Primaries (investing directly in funds), Secondaries (acquiring stakes in existing funds), and Co-Investments (direct investments alongside funds).
• Be prepared to discuss the pros and cons of each strategy. For example:
  • Primaries: Focus on fund manager selection, track record, and strategy alignment.
  • Secondaries: Analyze pricing, portfolio composition, and potential upside.
  • Co-Investments: Assess deal specifics, risk-return profile, and alignment with the fund’s strategy.

2. Primary Investment Case Study

If it’s a primary investment case study, here’s what you should prepare: - Fund Manager Evaluation: Look at the track record, team experience, and investment strategy. Highlight any unique aspects of the fund manager’s approach. - Market Opportunity: Assess the market the fund is targeting. Is it underpenetrated or oversaturated? Are there any macroeconomic or industry-specific trends that make this fund attractive? - Terms and Conditions: Be ready to evaluate the fund’s terms (e.g., fees, carry structure) and compare them to industry benchmarks. - Risk Assessment: Identify potential risks (e.g., over-concentration, market cyclicality) and discuss mitigating factors.

3. Secondary Investment Case Study

If the case study involves secondaries, focus on: - Portfolio Analysis: Evaluate the underlying assets in the fund. Look for diversification, quality of assets, and potential for growth. - Pricing: Assess whether the secondary stake is being acquired at a discount or premium and justify why it’s a good deal. - Exit Opportunities: Discuss potential exit strategies and expected returns.

4. Co-Investment Case Study

For co-investments, you’ll need to: - Analyze the Deal: Dive into the specifics of the investment opportunity. Look at the company’s financials, industry position, and growth potential. - Alignment with Fund Strategy: Ensure the co-investment aligns with the FoF’s overall strategy and risk appetite. - Risk-Return Profile: Discuss the expected returns and associated risks, including any downside protection.

5. General Preparation Tips

• Research the FoF: Understand their investment philosophy and recent deals. Tailor your answers to align with their approach.
• Practice Case Studies: Use resources like Value Investors Club or other investment memos to practice analyzing funds and deals.
• Prepare Questions: Have thoughtful questions ready about their investment process, decision-making criteria, and current market views.

6. Key Skills to Demonstrate

• Analytical thinking: Show your ability to evaluate investments critically.
• Commercial awareness: Highlight your understanding of market trends and dynamics.
• Communication: Present your findings clearly and concisely.

Good luck with your interview!

Sources: Q&A: 1st year FoF Infrastructure at Buyside, Preparing for the HF informational interview, Q&A: 3rd Year Hedge Fund Analyst, Investment Banking to a Hedge fund... Can You Make the Jump?