{"id":44864,"date":"2015-09-17T02:45:00","date_gmt":"2015-09-17T00:45:00","guid":{"rendered":"http:\/\/beta.next-finance.net\/strategie\/long-or-short-andreas-schmidt\/"},"modified":"2015-09-17T02:45:00","modified_gmt":"2015-09-17T00:45:00","slug":"long-or-short-andreas-schmidt","status":"publish","type":"post","link":"http:\/\/beta.next-finance.net\/en\/strategie\/long-or-short-andreas-schmidt\/","title":{"rendered":"Long or short, Andreas Schmidt?"},"content":{"rendered":"<p><strong>Do co-investors have to take a purely passive role?<\/strong><\/p>\n<p><strong>SHORT.<\/strong> The purest form of co-investment is often seen as<br \/>\nbeing practiced by institutional investors such as mediumsized<br \/>\npension funds and insurance companies. These may<br \/>\nhave the institutional patience and implicit confidence in their<br \/>\ncounterparties to limit themselves to a purely passive role<br \/>\nbehind a lead investor. By contrast, many family offices take a<br \/>\nmore active approach while co-investing, for example including<br \/>\nparticipation in corporate governance. This may not be a<br \/>\ncompletely pure form of co-investment but this large and diverse<br \/>\nconstituency is important and should not be ignored.<\/p>\n<p><strong>As co-investments are generally offered on a no-fee basis, can<br \/>\nthey exhibit adverse selection?<\/strong><\/p>\n<p><strong>LONG.<\/strong> One concern may be that lead investors will offer only<br \/>\nthe less attractive investment opportunities to prospective<br \/>\nco-investors (so-called adverse selection). One way to mitigate<br \/>\nthis risk would be to co-invest through a private-equity platform<br \/>\nthat itself produces a significant flow of investment and<br \/>\ndemonstrably pursues a highly selective approach with due<br \/>\nconsideration of its own fiduciary responsibilities.<\/p>\n<p><strong>Do mid-market funds also offer opportunities?<\/strong><\/p>\n<p><strong>LONG.<\/strong> Mid-market funds may lack the manpower and skills of<br \/>\nthe mega funds. However they are probably most in need of<br \/>\nco-investment and their often under-resourced investor-relations<br \/>\nteams may therefore be very keen to maintain close relations<br \/>\nwith their most active limited partners. The large numbers of<br \/>\nthese funds, combined with their relative lack of resources and<br \/>\norganization, have meant that they have proved a fertile hunting<br \/>\nground for the most sophisticated co-investors.<\/p>\n<p><strong>Must fundless sponsors always be ignored?<\/strong><\/p>\n<p><strong>SHORT.<\/strong> Fundless sponsors intend to put little or no equity into<br \/>\nthe deal into which you are being asked to invest, instead taking<br \/>\na fee or other forms of compensation. Such deals are not for<br \/>\nthe faint-hearted, but with appropriately aligned interests there<br \/>\nis in theory nothing to prevent a deal from a fundless sponsor<br \/>\noutperforming one done with a brand-name fund. This may be a<br \/>\nspace to watch if investors become increasingly crowded out of<br \/>\nmore traditional co-investments.<\/p>\n<p><strong>Can use of a co-investment fund make sense?<\/strong><\/p>\n<p><strong>LONG.<\/strong> Ironically, when a private-equity platform sells a<br \/>\nco-investment fund, it is in fact selling you a blind-pool limited<br \/>\npartnership (one without any visibility on ultimate investments) \u2013 pretty much the exact opposite of a normal co-investment.<br \/>\nBut this can make sense for an investor. In addition to mitigation<br \/>\nof adverse selection, with one commitment it may be possible<br \/>\nto achieve a degree of diversification (in terms of geography,<br \/>\nindustry, manager, size, investment style and risk profile) that<br \/>\nwould be impossible to achieve with a commitment to a single<br \/>\nmanager.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>The Global Head of Primary Private Equity at Deutsche Asset &#038; Wealth Management discusses opportunities and risks in co-investments&#8230;<\/p>\n","protected":false},"author":20,"featured_media":44862,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[1483],"tags":[1809,1687,1655,1651,1807,1706,2243,2068],"_links":{"self":[{"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/posts\/44864"}],"collection":[{"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/users\/20"}],"replies":[{"embeddable":true,"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/comments?post=44864"}],"version-history":[{"count":0,"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/posts\/44864\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/media\/44862"}],"wp:attachment":[{"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/media?parent=44864"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/categories?post=44864"},{"taxonomy":"post_tag","embeddable":true,"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/tags?post=44864"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}