Arms investors with powerful new tools for measuring and managing the risks associated with the various illiquid asset classes With risk-free interest rates and risk premiums at record lows, many investors are turning to illiquid assets, such as real estate, private equity, infrastructure and timber, in search of superior returns and greater portfolio diversity. But as many analysts, investors and wealth managers are discovering, such investments bring with them a unique set of risks that cannot be measured by standard asset allocation models. Written by a dream team of globally renowned…mehr
Arms investors with powerful new tools for measuring and managing the risks associated with the various illiquid asset classes
With risk-free interest rates and risk premiums at record lows, many investors are turning to illiquid assets, such as real estate, private equity, infrastructure and timber, in search of superior returns and greater portfolio diversity. But as many analysts, investors and wealth managers are discovering, such investments bring with them a unique set of risks that cannot be measured by standard asset allocation models. Written by a dream team of globally renowned experts in the field, this book provides a clear, accessible overview of illiquid fund investments, focusing on what the main risks of these asset classes are and how to measure those risks in today's regulatory environment. Provides solutions for institutional investors in need of guidance in today's regulatory environment Offers detailed descriptions of risk measurement in illiquid asset classes, illustrated with real life case studies Helps you to develop reliable risk management tools while complying with the regulations designed to contain the individual and systemic risks arising from illiquid investments Features real-life case studies that capture an array of risk management scenarios you are likely to encounter
Dr PETER CORNELIUS is heading AlpInvest Partners' economic and strategic research. Prior to his current position, he was the Group Chief Economist of Royal Dutch Shell, chief economist and Director of the World Economic Forum's Global Competitiveness Program, Head of International Economic Research of Deutsche Bank, a senior economist with the International Monetary Fund, and a staff economist of the German Council of Economic Advisors. He is the chairman of EVCA's 'Risk Measurement Guidelines' working group. He has been an adjunct professor at Brandeis University and a Visiting Scholar at Harvard University and has published widely in leading academic and trade journals and (co)authored several books, including International Investments in Private Equity (Elsevier/Academic Press). Dr CHRISTIAN DILLER is co-founder of Montana Capital Partners, focused on secondary liquidity in private equity through its own innovative investment product, sophisticated securitizations and risk management services for institutional investors. Previously, he was Head of Solutions at Capital Dynamics leading the structuring and portfolio and risk management activities. Christian advised some of the world's largest investors on portfolio rebalancing and structuring, cash flow planning and risk management in private equity. Prior to that, he worked for Allianz Group and Pioneer Investments. Christian is a member of the EVCA's 'Risk Measurement Guidelines' working group, co-chairman of the 'Technical Working Group on Solvency II & IORP' and lecturer at the CIPEI course held by the Oxford Said Business School. He is author of several articles for practitioners and academics and holds a Dr. rer. pol. in finance specializing on risk-/return characteristics of private equity funds. Dr DIDIER GUENNOC is co-founder of LDS Partners, specialised in decision systems, program structuring, corporate governance and risk management solutions for institutional investors in private equity. He also acts as the secretary of the International Private Equity and Venture Capital Valuation Board (IPEV Board). Previously he worked for Origo Management and advised EVCA, the European Private Equity and Venture Capital Association on public affairs, statistics and professional standards. He started his career at Xerfi, the leading French market research company. Didier was a member of the advisory board of the Centre for Entrepreneurial and Financial Studies (Technische Universität München - Germany) and of the private equity subcommittee of the Chartered Alternative Investment Analyst(R) Program. Didier holds a PhD in Business Administration from the University Robert Schuman, Strasbourg (France). Dr THOMAS MEYER is co-founder of LDS Partners, specialised in decision systems, program structuring, corporate governance and risk management solutions for institutional investors in private equity. Previously he was with EVCA, the European Investment Fund and Allianz Asia Pacific. He is a member of the EVCA's 'Risk Measurement Guidelines' working group and of the Chartered Alternative Investment Analyst Association's (CAIA(c)) private equity sub-committee and a Shimomura Fellow of the Development Bank of Japan's Research Institute of Capital Formation. Thomas is co-directing the Certificate in Institutional Private Equity Investing (CIPEI) course held by the Oxford Said Business School's Private Equity Institute and co-authored several books including Beyond the J-Curve and J-Curve Exposure .
Inhaltsangabe
Foreword xi Acknowledgements xiv 1 Introduction 1 1.1 Alternative investing and the need to upgrade risk management systems 1 1.2 Scope of the book 4 1.3 Organization of the book 6 PART I ILLIQUID INVESTMENTS AS AN ASSET CLASS 2 Illiquid Assets, Market Size and the Investor Base 17 2.1 Defining illiquid assets 17 2.2 Market size 20 2.3 The investor base 23 2.4 Conclusions 32 3 Prudent Investing and Alternative Assets 33 3.1 Historical background 34 3.2 Prudent investor rule 36 3.3 The OECD guidelines on pension fund asset management 38 3.4 Prudence and uncertainty 38 3.5 Conclusion 41 4 Investing in Illiquid Assets through Limited Partnership Funds 43 4.1 Limited partnership funds 43 4.2 Limited partnerships as structures to address uncertainty and ensure control 47 4.3 The limited partnership fund's illiquidity 49 4.4 Criticisms of the limited partnership structure 52 4.5 Competing approaches to investing in private equity and real assets 52 4.6 A time-proven structure 55 4.7 Conclusion 57 5 Returns, Risk Premiums and Risk Factor Allocation 59 5.1 Returns and risk in private equity 59 5.2 Conclusions 73 6 The Secondary Market 75 6.1 The structure of the secondary market 76 6.2 Market size 83 6.3 Price formation and returns 87 6.4 Conclusions 93 PART II RISK MEASUREMENT AND MODELLING 7 Illiquid Assets and Risk 97 7.1 Risk, uncertainty and their relationship with returns 98 7.2 Risk management, due diligence and monitoring 102 7.3 Conclusions 105 8 Limited Partnership Fund Exposure to Financial Risks 107 8.1 Exposure and risk components 108 8.2 Funding test 113 8.3 Cross-border transactions and foreign exchange risk 117 8.4 Conclusions 121 9 Value-at-Risk 123 9.1 Definition 123 9.2 Value-at-risk based on NAV time series 124 9.3 Cash flow volatility-based value-at-risk 129 9.4 Diversification 136 9.5 Factoring in opportunity costs 141 9.6 Cash-flow-at-risk 143 9.7 Conclusions 144 10 The Impact of Undrawn Commitments 149 10.1 Do overcommitments represent leverage? 150 10.2 How should undrawn commitments be valued? 151 10.3 A possible way forward 153 10.4 Conclusions 159 11 Cash Flow Modelling 161 11.1 Projections and forecasts 162 11.2 What is a model? 163 11.3 Non-probabilistic models 167 11.4 Probabilistic models 171 11.5 Scenarios 178 11.6 Blending of projections generated by various models 179 11.7 Stress testing 180 11.8 Back-testing 184 11.9 Conclusions 187 12 DistributionWaterfall 189 12.1 Importance as incentive 190 12.2 Fund hurdles 191 12.3 Basic waterfall structure 193 12.4 Examples for carried interest calculation 195 12.5 Conclusions 202 13 Modelling Qualitative Data 207 13.1 Quantitative vs. qualitative approaches 207 13.2 Fund rating/grading 208 13.3 Approaches to fund ratings 211 13.4 Use of rating/grading as input for models 216 13.5 Assessing the degree of similarity with comparable funds 218 13.6 Conclusions 220 14 Translating Fund Grades into Quantification 221 14.1 Expected performance grades 221 14.2 Linking grades with quantifications 225 14.3 Operational status grades 228 14.4 Conclusions 229 PART III RISK MANAGEMENT AND ITS GOVERNANCE 15 Securitization 233 15.1 Definition of securitization 233 15.2 Financial structure 237 15.3 Risk modelling and rating of senior notes 239 15.4 Transformation of non-tradable risk factors into tradable financial securities 244 15.5 Conclusions 248 16 Role of the Risk Manager 249 16.1 Setting the risk management agenda 249 16.2 Risk management as part of a firm's corporate governance 251 16.3 Built-in tensions 253 16.4 Conclusions 255 17 Risk Management Policy 257 17.1 Rules or principles? 258 17.2 Risk management policy context 258 17.3 Developing a risk management policy 262 17.4 Conclusions 264 References 267 Abbreviations 277 Index 279
Foreword xi Acknowledgements xiv 1 Introduction 1 1.1 Alternative investing and the need to upgrade risk management systems 1 1.2 Scope of the book 4 1.3 Organization of the book 6 PART I ILLIQUID INVESTMENTS AS AN ASSET CLASS 2 Illiquid Assets, Market Size and the Investor Base 17 2.1 Defining illiquid assets 17 2.2 Market size 20 2.3 The investor base 23 2.4 Conclusions 32 3 Prudent Investing and Alternative Assets 33 3.1 Historical background 34 3.2 Prudent investor rule 36 3.3 The OECD guidelines on pension fund asset management 38 3.4 Prudence and uncertainty 38 3.5 Conclusion 41 4 Investing in Illiquid Assets through Limited Partnership Funds 43 4.1 Limited partnership funds 43 4.2 Limited partnerships as structures to address uncertainty and ensure control 47 4.3 The limited partnership fund's illiquidity 49 4.4 Criticisms of the limited partnership structure 52 4.5 Competing approaches to investing in private equity and real assets 52 4.6 A time-proven structure 55 4.7 Conclusion 57 5 Returns, Risk Premiums and Risk Factor Allocation 59 5.1 Returns and risk in private equity 59 5.2 Conclusions 73 6 The Secondary Market 75 6.1 The structure of the secondary market 76 6.2 Market size 83 6.3 Price formation and returns 87 6.4 Conclusions 93 PART II RISK MEASUREMENT AND MODELLING 7 Illiquid Assets and Risk 97 7.1 Risk, uncertainty and their relationship with returns 98 7.2 Risk management, due diligence and monitoring 102 7.3 Conclusions 105 8 Limited Partnership Fund Exposure to Financial Risks 107 8.1 Exposure and risk components 108 8.2 Funding test 113 8.3 Cross-border transactions and foreign exchange risk 117 8.4 Conclusions 121 9 Value-at-Risk 123 9.1 Definition 123 9.2 Value-at-risk based on NAV time series 124 9.3 Cash flow volatility-based value-at-risk 129 9.4 Diversification 136 9.5 Factoring in opportunity costs 141 9.6 Cash-flow-at-risk 143 9.7 Conclusions 144 10 The Impact of Undrawn Commitments 149 10.1 Do overcommitments represent leverage? 150 10.2 How should undrawn commitments be valued? 151 10.3 A possible way forward 153 10.4 Conclusions 159 11 Cash Flow Modelling 161 11.1 Projections and forecasts 162 11.2 What is a model? 163 11.3 Non-probabilistic models 167 11.4 Probabilistic models 171 11.5 Scenarios 178 11.6 Blending of projections generated by various models 179 11.7 Stress testing 180 11.8 Back-testing 184 11.9 Conclusions 187 12 DistributionWaterfall 189 12.1 Importance as incentive 190 12.2 Fund hurdles 191 12.3 Basic waterfall structure 193 12.4 Examples for carried interest calculation 195 12.5 Conclusions 202 13 Modelling Qualitative Data 207 13.1 Quantitative vs. qualitative approaches 207 13.2 Fund rating/grading 208 13.3 Approaches to fund ratings 211 13.4 Use of rating/grading as input for models 216 13.5 Assessing the degree of similarity with comparable funds 218 13.6 Conclusions 220 14 Translating Fund Grades into Quantification 221 14.1 Expected performance grades 221 14.2 Linking grades with quantifications 225 14.3 Operational status grades 228 14.4 Conclusions 229 PART III RISK MANAGEMENT AND ITS GOVERNANCE 15 Securitization 233 15.1 Definition of securitization 233 15.2 Financial structure 237 15.3 Risk modelling and rating of senior notes 239 15.4 Transformation of non-tradable risk factors into tradable financial securities 244 15.5 Conclusions 248 16 Role of the Risk Manager 249 16.1 Setting the risk management agenda 249 16.2 Risk management as part of a firm's corporate governance 251 16.3 Built-in tensions 253 16.4 Conclusions 255 17 Risk Management Policy 257 17.1 Rules or principles? 258 17.2 Risk management policy context 258 17.3 Developing a risk management policy 262 17.4 Conclusions 264 References 267 Abbreviations 277 Index 279
Es gelten unsere Allgemeinen Geschäftsbedingungen: www.buecher.de/agb
Impressum
www.buecher.de ist ein Shop der buecher.de GmbH & Co. KG Bürgermeister-Wegele-Str. 12, 86167 Augsburg Amtsgericht Augsburg HRA 13309
