November 2009 Issue

Enrique Brito, partner and senior managing director of investment bank The McLean Group, examines the use of options theory to value irreversible investments made under uncertainty and requiring flexibility.

With a turnaround investment, communications are more sensitive than ever – between the increased number of stakeholders typically involved, and the fluidity of the situation, the potential for missteps is great. PEI spoke with several private equity principals and independent communications professionals on what GPs should do to stay in the clear.

PEI Media’s sister publication, PERE magazine, recent sat down to speak with Keith O’Donnell, the global head of real estate at Taxand, to discuss the grand tax themes shaping the industry. From crackdowns on abuse of tax treaties to attacks on interest deductibility of intra-company loans and the taxation of debt investments, there is plenty to concern private fund managers.

PEM's most popular articles remain those that deal with the numerous unclear, imminent threats to GPs.

An enviable carve-out from the US Investment Advisers Registration Act bill, and possible new funding from the government, might make structuring your fund as a Small Business Investment Company a tantalising prospect.

Groups such as the BVCA have come out against proposed changes to the UK’s takeover rules, which if enacted could add additional barriers and extra costs to private equity-backed acquisitions.

The US House Financial Services Committee yesterday passed HR 3818, the Private Fund Investment Adviser’s Registration Act, by a vote of 67-1. The bill raises the minimum threshold for assets under management to $150m from $30m and includes an exemption for Small Business Investment Companies as well as venture capital firms.

How will small firms handle fundraising in post-placement agent world?

The SEC chairman today said she would seek to avoid ‘broad carve-outs’ within proposed legislation that would require private funds to register as investment advisors, possibly referring to at least one effort to exempt venture capital funds from the process.

The European Central Bank has become the latest influential group, including the UK Financial Services Authority and London mayor’s office, to raise concerns in the past week about the negative consequences that proposed regulations could have on Europe’s private equity industry.

Boris Johnson has said that a recent survey of British business leaders underscores the threat posed to London’s financial services and fund industry should stricter regulations and higher taxes force more firms and executives out of the city.

The firm has agreed to allow LPs in the fifth fund to shrink commitments by up to 30%.

A buyer of company debt will have to prove that they are undertaking a 'genuine company rescue' in order to avoid paying taxes on cancellation of indebtedness income.

Though statistics from 2008 indicate that most new RIAs can expect to be hit with a deficiency notice during their first SEC audit, there are several areas they can focus on in advance in order to make the process go more smoothly.

The Euronext- listed fund has ceased new investments since April, and will lower its management fees until it returns to growth mode.

The 'realignment of interests' was a theme repeatedly raised at the London conference Wednesday, with one investor noting LPs, too, must increase transparency.

First Reserve has joined five other GPs on the steering committee of the United Nations’ Principles for Responsible Investment, a move that was driven by LP requests.

Senior members of Citi’s disbanded fund placement team - including Andrew Wilbur and Laurent de Rosiere, former European co-heads - have moved on to other firms.

Excessive deal fees, succession issues and the ‘Wimbledonisation’ of the LP base are problems European private equity must solve, according to Danny Truell.

By requiring funds to get approval for any changes to their PPMs or LPAs, the European Commission’s proposed regulatory changes would impose substantial time constraints on general partners, especially during fundraising periods.

The distinction between distressed debt investing and running a lending business remains unclear after a recent IRS memorandum.

While recent changes to French tax rules bring the country closer to the rest of the world regarding carried interest, a delay in announcing expected clarifications is leaving many managers wondering how to best structure funds.

The Commission will now evaluate the 170 comments it has received - most of which were critical of the proposal.

The government of China will allow domestic insurance companies to invest in real estate.

The ILPA guidelines are spurring LPs to ask for more authority in governance matters, including ‘approving’ conflicts of interest.

Uncertainty over the scope of the UK Pensions Regulator means that private equity funds should get started early in seeking official “clearance” before going through with transactions involving defined benefit pensions schemes, as this can drag out the investment process.