Private Equity Analytics & Governance Platform and Services

Transcription

1 Private Equity Analytics & Governance Platform and Services PE Fee and AcordIQ and Private Equity Accounting Insights (PEAI) are dedicated to supporting the operations and technology needs of institutional investors, private equity (PE) asset owners and allocators. Our expertise and advanced, integrated platform combine to deliver a comprehensive suite of outsourced high value PE fee and carried interest verification, portfolio tracking, valuations & analysis, and governance services. The Private Equity Analytics & Governance Platform and Services redefine portfolio and manager oversight processes by consolidating disparate sources of data and analytics in a single, integrated environment. Not only is the data more accessible, but the business decision processes which rely on that data are themselves systemized in a rules- and dashboard-driven environment. Both quantitative and qualitative, structured and unstructured inputs combine seamlessly to support a transparent PE Risk / Scenario Analysis & Cash Management PE Valuation Module & Analytics PE Performance PE Fee & PE Modules Capital Call and Distribution Notice Processing & Tracking Limited Partnership Agreement (LPA) Scorecard ILPA Fee Reporting Template Upload PE services include: Systematic carried interest and management fee calculation and verification Capital Call & Distribution Notice processing, cash management and portfolio tracking ILPA fee reporting LPA analysis and benchmarking PE performance measurement company valuations and value driver analysis Risk measurement Independent verification, audit and certification

2 Private Equity Services The suite of PE services allows for an integrated and holistic end-to-end Private Equity governance and intelligence process. Services are customized for Limited Partners (LPs) and General Partners (GPs) needs, ensuring that information flows freely from portfolio companies through GPs to LPs. PE Fee & Capital Call and Distribution Notice Processing & Tracking ILPA Fee Reporting Template Upload Limited Partnership Agreement (LPA) Scorecard PE Performance PE Valuation Module & Analytics PE Risk / Scenario Analysis & Cash Management Calculates and validates carried interest and management fees on a one-off or periodic basis using LPA attributes and cash flow and other data. Also enables LPs to get estimated accrued carried interest for funds that do not provide this information. Allows LPs to accurately record cash flows at fund level and portfoliocompany level directly from capital call and distribution notices using the standardized ILPA Transaction Types. Module also tracks PE investments at the fund level and portfolio-company level. Lets GPs upload ILPA fee specific information via web template or XML standard (with data validation) resulting in increased uniformity in disclosures. This allows for more streamlined fee analysis and increased transparency. Optional audit service to verify proper allocation also available. Systemic comprehensive due diligence solution using online scorecard/ questionnaire. Assesses potential investee funds LPAs and key fund terms such as carried interest distribution waterfall structure, level of management fee, key-man provisions, etc. Calculates PE performance metrics such as various IRRs, MIRR, Multiples, different PME methodologies, Alpha methods and more. Value Driver Analysis allow LPs and GPs to understand and measure value created by GPs. Supports pre-built statistics and charts for visualization and enable cross-portfolio analytics. Allows GPs to better determine portfolio companies fair value using variety of best-practice valuation techniques. Equips LPs with a valuable tool to sense-check GP s valuations and highlight potential irregularities. It also equips LPs with a powerful tool to understand the GP s value creation and quantify the effect of the different deal value drivers. Analyzes risk (funding, liquidity, market and capital risk) and returns on a fund and portfolio level. Enables determination of best cash management strategies. Provides scenario analysis capabilities that enable modeling of future cash flows and valuations.

3 PE Fee & Private Equity Fee and Private equity investors (Limited Partners, or LPs ) entrust private equity fund managers (General Partners, or GPs ) with billions to invest in private equity on the promise of high returns. As a reward, the GPs typically retain 20% of the LPs profits (and cash) in the form of carried interest (or carry ). The problem is that the calculation is often very complex and there isn t always an easy way for LPs to check if GPs flip the right amount of cash/profit from them to the Partner (CIP). Sometimes, with a very small tweak (intentionally or unintentionally) buried in the complex calculation, the result may be a variance in the range of millions. In addition, many GPs don t provide information on the accrued carried interest until carry actually kicks in, in which case LPs may be overestimating the fair value of interest in these funds. The AcordIQ / PEAI PE Fee and platform and services help LPs ensure that GPs are charging them the right amount of carried interest and management fees, and enables LPs to get estimated accrued carried interest for funds that do not provide this information.

4 Client Engagement Model: Our six step process Step 1: Initial Data Set Up LP provides generic information and documents including: Investee fund data (e.g. commitments, vintages, etc.) Investee funds Limited Partnership Agreements (LPAs) Funds cash flows Pre-carry total fund Net Asset Value allocated to LP Other relevant additional information (full list Step 3: Carry and Management Fee s AcordIQ/PEAI calculates, as of a certain date, a rough estimate of the total carried interest (unrealized/accrued and/or realized) for investee funds based on the information provided in Step 1. If the LP requires realized carry calculation for deal-by-deal carry arrangements, additional deal-level information is required for realized and unrealized deals/investments. Step 5: Variance Reconciliation As an optional time-based advisory service, AcordIQ/PEAI can reconcile the carry variance for the investee funds with carry variance over the acceptable LP tolerance level by drilling further down, and if necessary, fine-tuning the calculation for the funds with the significant variances. Step 2: Waterfall Provisions Review and Modeling AcordIQ/PEAI performs brief review of all investee funds waterfall provisions in the LPA to establish parameters required for the models to calculate carried interest and management fees. Step 4: Variance Calculation AcordIQ/PEAI calculates the variance between estimates and GPs numbers (where available), establishes a level of tolerance/error that is acceptable to the LP and highlights the variances over this tolerance level by providing individual fund-by-fund reports and a summary report. Step 6: Initial Online Report and Ongoing Quarterly Reports The LP is provided with an initial report showing AcordIQ/PEAI calculated carry and management fee, respective GP numbers (where available), variance and a Confidence Score/Factor on a fund-by-fund basis, followed by quarterly reports. For subsequent quarterly reports, the LP provides information (cash flows and NAV as per point 1, GPs carry numbers, capital statements, financial statements and quarterly reports) on a quarterly basis.

5 Private Equity Fee and The AcordIQ / PEAI PE Fee and system uses the model and data from the previously described six step process to present the data online so it can be tracked on an ongoing basis. This makes it easy to validate carried interest for each PE fund or to find discrepancies. Individual fund details as well as an aggregated view are presented. The system supports different types of carried interest models for a variety of strategies (e.g. buy-outs, property funds, infrastructure, Fund-of-funds, etc.): Whole-fund/All-contributions-first (European style model) Deal-by-deal / Hybrid (US style model) It displays the clear link between LPA clauses and model attributes : Total Fund Commitment / Client s Commitment Calculation Date (quarter-end) GP % and GP Catch up % Preferred Return LP/GP Carry Split for residual (multiple/tiered) Calculation method for Preferred Return Preferred Return calculated as an IRR or as an interest on investors contributions Preferred Calendar convention (e.g. A/365, 30/360, A/A) Compounding if yes, when and how often Return of Acquisition costs on partial realizations (LPs first or pro-rata) Example PE Command Center Private Equity Summary - 30 Jun 2015 Strategy Client Commitment in $ Invested Capital Outstanding Commitment in $ Avg. IRR % Avg. Gross Multiple Mgmt Fee & Carry in % of Invested Capital Debt 25,000,000 17,500,000 7,500, % 2.73 x 1,250,020 1,150,075 2,500,000 2,500, % Equity 35,000,000 32,500,000 2,500, % 1.22 x 3,200,252 3,150,723 1,125,239 1,100, % EMG 15,000,000 15,000, % 1.75 x 1,424,233 1,450, , , % Buy-Out 10,000,000 8,750,000 1,250, % 2.75 x 750, , , , % Real Estate 30,000,000 20,000,000 10,000, % 0.90 x 7,324,230 7,322,302 3,234,250 3,250, % Grand Total 115,000,000 93,750,000 21,250, % 1.66 x 13,948,967 13,798,564 8,059,818 8,014, % 8,000,000 7,000,000 6,000,000 5,000,000 4,000,000 3,000,000 2,000,000 1,000,000 - PE Carry and Mgmt Fee Analytics Debt Equity EMG Buy-Out Real Estate IRR % Fees vs. IRR % 30.00% 25.00% 20.00% 15.00% 10.00% 5.00% 0.00% 0.00% 10.00% 20.00% 30.00% 40.00% 50.00% 60.00% 70.00% Mgmt Fee & Carry in % of Invested Capital Debt Equity EMG Buy-Out Real Estate

6 Example PE Aggregation Carry variance thresholds: 5% of GP Carry / $1m absolute Variance / 3% of commitment Max. CIP Max. Max. GP Fund ID Fund Name Preferred Catch up Number Return CIP (Client Share) (Split) PE Calculation Result Confidence Score *) Variance Variance in % of GP Carry Variance in % of Commit ment FUND001 ABC 8% 20% 20% 2,531,512 2,531,761 (250) 0.0% 0.0% FUND002 XYZ 8% 20% 20% 167, , % 0.0% FUND003 ABC 10% 20% 25% 26,451,891 26,451, % 0.0% FUND004 XYZ 8% 20% 25% 19,459,819 23,195,307 (3,735,489) -19.2% -2.7% FUND005 ABC 8% 20% 20% 71,885,308 72,827,166 (941,858) -1.3% -0.1% FUND006 XYZ 9% 20% 20% 241, , % 0.4% FUND007 ABC 0% 0% 30% 89,275,748 87,007, ,268, % 3.5% *) Lowest Score/Confidence = 1 / Highest Score/Confidence = 5 Example PE Single Fund Summary

7 Example PE Waterfall / Variance / Score Card About AcordIQ and Private Equity Accounting Insights (PEAI) AcordIQ includes some of the industry s most experienced and talented business and technology professionals. Our deep understanding of the challenges facing institutional investors has driven the development of both technology and processes to deliver transparency across all asset classes at the heart of the investment process. PEAI s mission is to drive change and promote transparency in the asset class and help LPs and GPs better understand the private equity industry and consistently exceed their expectations. Founder Partner Mariya Stefanova is the author of the best-selling book Private Equity Accounting the first and only comprehensive book on private equity accounting in the world, published by PEI Media in 2011, Private Equity Accounting, Investor Reporting and Beyond published by FT Press in 2015 and : The Definitive Guide to be published in 2016 by PEI Media.