Funds of Funds and Secondary Fund question
Hi all,
I recently received an interview question at a PE interview, the interviewer asked me if I was working in a Funds of Funds and is looking to invest into GPs, what are the factors (issues) / general framework that I should be considerating before making that investment?
Also, if i was working for a secondary fund, what are the factors (issues) / general framework that I should be considerating before making an investment?
I have nevered looked into primary and secondary fund investing, so would very much appreciate your expert views on this.
Thanks in advance.
i'll give you a few pointers, in no particular order
Primary
Strength of the manager / track record Size of fund raise Number of re-ups how drawn is previous fund how many exits from previous fund terms alignment (how much cash is the gp investing) is the fund size appropriate for strategy is the market crowded stength of team, how is carry divided financial engineering or operational improvement (multiple expansion) use bid process/auctions or use network investment size / number of investments will the fund share deals with 'global' funds control/minority positions lead or co-invest levels of debt most favoured nation (google what this means) valuation techniques
secondary (as above plus)
discount % drawn number of portcos ebitda growth in portcos / performance in underlyings other LPs progess towards realisations / exits strength of cap markets how has team changed since inv period started
etc etc etc etc
Thank you very much for this helpful insights, overall i guess the two main elements are firstly GP's track record in investing and also the fees they charge (although this is pretty standard, 2/20 rule applies)/
Any other thoughts anyone?
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