Hi,
I know there are a couple of previous threads similar to this, but I had a couple of specific questions and wanted to make sure I fully understand.
I wanted to ask how private equity fund of funds/secondaries funds value LP stakes?
From my understanding there are two ways, 1) bottom-up - valuing the fund via individually modelling/valuing the portfolio companies then summing them up and calculating the equity stake/proportion the LP has and 2) valuing the fund itself and the LP stake of the fund.
-
In relation to 2), how would you value the fund itself and the LP stake? e.g. if an LP had a 20% stake in PE Fund A, and was looking to sell the entire 20% stake to FoF B, how would FoF B decide how much the 20% stake is worth? Would the FoF B calculate the PE Fund A's overall value i.e. calculating the NAV (Current Assets - Current Liabilities) and then multiply the NAV by 0.2 (to calculate the proportion of the LP stake i.e. in this case the 20% stake) and then applying a small discount or premium?
-
Also, how would you decide whether to apply a discount or premium? I.e. why is a discount applied if you're buying this stake closer to exit, surely you should be buying at a premium as you're more likely to have a higher IRR due to the shorter time frame of investment?
-
Additionally, do Fund of Funds ever leverage up on their investments? I.e. in their co-investment teams when they provide the minority investment alongside the GP, would they ever leverage up like the GP / PE funds? Also same for secondaries fund of funds, would they ever leverage when buying an existing LP stake?
Thank you!
Hi mango n lime, whoops, looks like nobody chimed in here.... maybe one of these discussions below is relevant:
Fingers crossed that one of those helps you.
Rerum consequuntur est rem eveniet unde deleniti. Perspiciatis dolorum eius dolores est. Nulla officia quibusdam asperiores aliquam cupiditate aperiam. Fugiat soluta amet voluptatem vero accusantium error qui.
Earum dolore et mollitia et enim porro ipsum. Ut inventore distinctio doloribus cumque magnam velit dolor. Repudiandae quia et officiis unde aut ipsa voluptatem. Facilis sed aut est.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...