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Mike Smeed, InMotion Ventures, Fund Shack

Corporate venture capital | Mike Smeed, Jaguar Land Rover | Ep 58

Mike Smeed is managing director of InMotion Ventures, the corporate venturing arm of Jaguar Land Rover.

In this episode of the Fund Shack podcast, he speaks to Ross Butler about what the company looks for in start-up candidates and the rapidly evolving nature of corporate venture capital.

Mike the Managing Director of InMotion Ventures, the corporate venture capital (CVC) arm of Jaguar Land Rover (JLR). Mike discusses his career background, including roles at a Shanghai-based joint venture and Walgreen Boots, and delves into the unique aspects of CVC compared to traditional venture capital (VC).

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Key Highlights:

Corporate Venture Capital (CVC) vs. Venture Capital (VC):

  • Similarities: CVC and VC both perform due diligence, focus on valuation and metrics, and aim for strategic investments.
  • Differences: Historically, CVCs were viewed skeptically due to fears of corporate overreach. Modern CVCs have adopted VC professionalism and often invest off their parent companies’ balance sheets, with some even taking external capital.

Role of InMotion Ventures:

  • Strategic Focus: InMotion Ventures aims to accelerate innovation and support JLR’s strategic transformation, especially in areas like climate, industrial, and enterprise technologies.
  • Investment Approach: Unlike many CVCs, InMotion invests in early-stage startups (seed to Series A) to add significant value to both JLR and the startups.

CVC Evolution:

  • Professionalization: Many CVCs now operate with the same rigor as traditional VCs, including thorough background checks and strategic valuations.
  • Integration with Parent Companies: CVC leaders often come from within the parent company, blending corporate insight with investment acumen.

Strategic Mandate:

  • Innovation and Collaboration: InMotion Ventures aims to help JLR achieve carbon neutrality by 2039 and focuses on technologies critical to this transformation.
  • Partnerships: The firm prefers co-investing and does not lead funding rounds, maintaining about a 5% equity stake to ensure active involvement without overwhelming influence.

Investment Justifications:

  • Ecosystem Access: Being an active investor attracts other investors and startups, facilitating ecosystem engagement.
  • Innovation and Speed: Investing in startups accelerates innovation and market readiness, providing JLR with early access to cutting-edge technologies.
  • Capital Efficiency: Strategic investments leverage larger rounds by financial VCs, maximizing impact with relatively small contributions.

Success Stories and Examples:

  • Investments: Mike discusses successful investments, such as in companies developing head-up displays and augmented reality technologies.
  • Collaboration with Competitors: InMotion Ventures collaborates with other automotive giants like Volvo and BMW to co-invest in promising technologies.

Value to Startups:

  • Strategic Support: Startups benefit from JLR’s extensive resources, including engineering expertise and testing facilities.
  • Mutual Benefits: While InMotion seeks financial returns, the primary goal is strategic alignment with JLR’s broader goals.

The interview highlights the evolving landscape of CVC, emphasizing strategic partnerships, professional investment practices, and the mutual benefits of fostering innovation within large corporate structures. Mike underscores the importance of balancing financial returns with strategic goals to drive both corporate growth and startup success.

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#Innovation #Technology #DigitalTransformation #VentureCapital #Startups #Entrepreneurship #CorporateVenture #AutomotiveIndustry #Sustainability #FutureOfMobility #BusinessGrowth #EmergingTechnologies #Industry40 #TechInvestments

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Fund Shack is a private equity podcast and global media channel for alternative investment professionals. Fund Shack is produced by Linear B Group and if you are interested in appearing on the show, wish to propose a client, or are interested in sponsorship, contact:

Katie Mitchell

katie@linearb.media

Linear B Group

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Bernard Fairman, Foresight Group, Fund Shack

Renewables, infrastructure and international equity | Bernard Fairman, Foresight Group | Ep 57

Foresight Group was a pioneer in renewable energy investment back in the 1990s. Today, it is a diversified investment group listed in London. Its founder and chairman, Bernard Fairman, talks to Ross Butler about

  • Its expansion into global infrastructure;
  • Why he favours hydrogen over electric, and
  • His plans to build out the firm’s UK venture investment arm into an international-regional growth equity franchise.

RW Blears: Our sponsor for this episode is RW Blears, a UK law firm specialising in fund management. If you are a UK venture capital manager or growth investor and need a trusted legal adviser, visit https://blears.com/

Fund Shack podcast, host Ross Butler interviews Bernard Fairman, the Executive Chairman of Foresight Group. Bernard discusses the evolution and growth of Foresight Group, a sustainability-led investment manager co-founded by Bernard in 1984 and listed on the London Stock Exchange in 2021. The conversation covers various aspects of the business, including infrastructure, private equity, and capital management.

Key Highlights:

Company Evolution:

  • Foresight Group started with a focus on venture capital but shifted to renewable energy infrastructure around 2006, foreseeing solar energy as the cheapest form of energy due to Moore’s Law.
  • The company now also focuses on hydrogen as the next significant step in the energy transition.

Private Equity Strategy:

  • Foresight Group has become one of the largest regional private equity players in the UK by partnering with local authority pension funds.
  • The company aims to invest in local businesses to create jobs and generate regional wealth.

Investment Approach:

  • The firm’s strategy includes investing in renewable energy projects and regional private equity deals.
  • Bernard emphasizes the importance of scale in renewable energy to drive down costs and the role of government policies in supporting industry growth.

Challenges and Opportunities:

  • Bernard discusses the competitive landscape of infrastructure investment and the convergence of private equity and infrastructure skills.
  • He highlights the massive opportunities in solar energy and the energy transition, predicting it to be a multi-trillion dollar industry.

Future Goals:

  • Foresight Group aims to significantly expand its infrastructure business and possibly enter international markets, starting with raising local funds before expanding further.

Market Insights:

  • Bernard provides insights into the challenges of electric vehicles, emphasizing the need for coherent government energy policies and the regressive impact of rapid transitions without proper planning.

Listing on the Stock Exchange:

  • The listing on the London Stock Exchange has increased the company’s visibility but has not been effective as an acquisition currency due to low market liquidity.

#Sustainability #RenewableEnergy #VentureCapital #PrivateEquity #SolarEnergy #HydrogenEconomy #InvestmentManagement #InfrastructureInvestment #CleanTech #EnergyTransition

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Fund Shack is a private equity podcast and global media channel for alternative investment professionals. Fund Shack is produced by Linear B Group and if you are interested in appearing on the show, wish to propose a client, or are interested in sponsorship, contact:

Katie Mitchell

katie@linearb.media

Linear B Group

Fund-Shack-Private-Equity-Podcast-Episode-55jpg

Central Europe buyouts: a surprisingly big opportunity | Robert Knorr, MidEuropa | Ep 56

MidEuropa pioneered private equity buyout investing in Central Europe, launching in 1999. Robert Knorr has been a partner since 2007. He was recently awarded Private Equity Mid Market Leader of the Year at the Real Deals private equity awards for his pivotal role in investment in the region. In this podcast he talks to Ross Butler about opportunities from Poland to the Med, and a very big win in Romania with Profi.

Key Highlights

In this episode of the Fund Shack podcast, Ross Butler interviews Robert Knorr, Managing Partner at MidEuropa, to explore the firm’s pioneering role in private equity investment across Central Europe. MidEuropa, established in 1999, has become a key player in the region, transitioning from venture capital to buyout funds. The discussion highlights their strategic focus on sectors such as consumer goods, healthcare, and technology, emphasizing the importance of sustainability and digitalization in their investment strategies.

Private Equity and Buyout Funds: MidEuropa has been instrumental in shaping the private equity landscape in Central Europe. Their transition from venture capital to buyout funds has been a strategic move to capitalize on the region’s economic development and emerging markets.

Investment and Economic Development: The firm’s investments have significantly contributed to the economic transition and development of Central European countries, integrating them into the broader European Union market.

Sector Focus: MidEuropa targets consumer goods, healthcare, and technology sectors, areas that offer high growth potential and align with their strategic investment goals. Sustainability and Digitalization: Emphasizing sustainability, MidEuropa promotes energy transition and sustainable practices. They also leverage digitalization to enhance business services and operations.

Corporate Carve-Outs and Cross-Border Investments: The firm has successfully executed corporate carve-outs and cross-border investments, demonstrating their expertise in managing complex mergers and acquisitions (M&A).

Nearshoring: Leveraging the talent pool in Central Europe, MidEuropa facilitates nearshoring of services, providing cost-effective and high-quality business services.

Financial Returns and Investor Relations: The episode details MidEuropa’s approach to delivering strong financial returns and maintaining robust investor relations.

#privateequity #investment #centraleurope #sustainableinvestment #emergingmarkets #businessgrowth #economicdevelopment #venturecapital #digitaltransformation #infrastructure #telecom #consumergoods #HealthcareInvesting #poland #techinvestments

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Fund Shack is a private equity podcast and global media channel for alternative investment professionals. Fund Shack is produced by Linear B Group and if you are interested in appearing on the show, wish to propose a client, or are interested in sponsorship, contact:

Katie Mitchell

katie@linearb.media

Linear B Group

Etienne Deshormes, Secondaries, Fund Shack

Private equity secondaries: everything you need to know, with Etienne Deshormes

In this Fund Shack podcast with Ross Butler, Etienne Deshormes, founder of Elm Capital, reveals where the market for private equity secondaries is headed.

Key highlights

In this engaging episode of the Fund Shack podcast, 🎙️ Ross Butler interviews Etienne Deshormes, CEO of Elm Capital, to delve into the intricacies of the private equity secondary market. Elm Capital, founded in 2004 by Etienne after his career in investment banking at JP Morgan, specializes in providing liquidity to private market investors.

Private Equity Secondaries: Etienne Deshormes explains how the secondary market provides liquidity to an inherently illiquid sector. He outlines the development of the market from its early days in the 2000s when it was discreet and associated with distress sales, to its current, more accepted status.

Global Financial Crisis Impact: The 2008 financial crisis was a turning point for the secondary market. Etienne highlights how the crisis forced many LPs to seek liquidity solutions, leading to a surge in secondary transactions. This period marked the only time in his career when assets were sold at a 100% discount, underscoring the desperation for liquidity.

Liquidity Solutions: The discussion includes how the secondary market has evolved as a strategic tool for managing portfolios, not just in distress situations. Etienne notes the rise in the use of secondary transactions to handle overexposure and liquidity issues exacerbated by recent economic challenges such as inflation and rising interest rates.

Current Market Dynamics: Etienne describes the current market conditions, emphasizing the impact of the denominator effect and rising interest rates on private equity portfolios. He explains how these factors have increased the need for secondary transactions as a liquidity solution.

Denominator Effect: The podcast covers the impact of the denominator effect, where declines in public market values cause private equity allocations to exceed target levels, forcing LPs to sell stakes to rebalance their portfolios.

Continuation Funds: Detailed insights are provided into continuation funds, which allow GPs to manage assets beyond the typical fund life by selling them to new vehicles backed by secondary investors. Etienne discusses the evolution of continuation funds from being a last resort to a strategic option for managing high-quality assets and mature portfolios.

Investor Strategies: The podcast delves into how LPs and GPs navigate the secondary market to optimize their portfolios. Etienne discusses different strategies, such as selling single fund interests or entire portfolios, and the factors influencing these decisions.

Market Pricing and Discounts: Etienne explains how secondary market pricing works, particularly during downturns when discounts can be steep. He provides examples from 2022, where buyout funds were trading at significant discounts due to market conditions.

Role of Elm Capital: Elm Capital’s role in the secondary market is highlighted, including how they assist clients in finding buyers or sellers for secondary transactions. Etienne describes their integrated approach to serving both primary and secondary market needs.

Future Outlook: Etienne shares his outlook for the secondary market in 2024, predicting increased deal flow and a gradual recovery in pricing as public markets stabilize. He also discusses the long-term potential for the secondary market to become more mainstream as more investors recognize its strategic value.

Etienne Deshormes explains the evolution of the private equity secondary market, highlighting its importance as a liquidity solution for LPs. Initially met with reluctance, the secondary market gained traction post-2008, providing a necessary outlet during financial crises. Deshormes discusses the current market conditions, emphasizing the challenges posed by rising interest rates and the denominator effect. He elaborates on the mechanisms of continuation funds, their acceptance, and strategic importance in today’s market. The conversation also touches on the operational role of Elm Capital in facilitating these transactions and the future potential for technology to streamline secondary market processes.

#PrivateEquity #SecondaryMarket #LiquiditySolutions #PrivateMarkets #InvestmentBanking #FinancialCrisis #DenominatorEffect #ContinuationFunds #InvestmentStrategies #Fundraising

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Fund Shack is a private equity podcast and global media channel for alternative investment professionals. Fund Shack is produced by Linear B Group and if you are interested in appearing on the show, wish to propose a client, or are interested in sponsorship, contact:

Katie Mitchell

katie@linearb.media

Linear B Group

Chris Field, Dechert, Fund Shack podcast

Private equity gets defensive: a global lawyers perspective

With a deal drought across the global private equity industry, we talk to Chris Field of global law firm Dechert about what’s next for M&A and buyout deal flow for 2024. We discuss valuations and defensive deal structures as vendors and buyers find ways to come together.

Top quote: “I have never worked on an earn-out, ever, that has not resulted in some form of dispute.'”

In this Fund Shack podcast with Ross Butler, Chris reveals what it takes to make it as a top private equity lawyer.

Fund Shack Podcast Featuring Chris Field of Dechert

In this engaging episode of the Fund Shack podcast, 🎙️ Ross Butler interviews Chris Field, a partner at the global law firm Dechert, to discuss the current state of international private equity markets and the intricacies of private equity lawyering.

Highlights:

  1. Market Sentiment and Interest Rates: Chris Field highlights the fluctuating sentiment in the private equity market, noting the anticipation of rate cuts and their potential impact on deal-making. He explains how interest rates have become the biggest challenge for private equity firms, affecting deal volume and value.
  2. Deal Volume and Value: Despite a significant drop in deal volume and value over the past year, 2023 outperformed 2019 levels. Chris explains this apparent paradox, attributing it to the short-term memory of market participants and the exceptionally high activity levels in 2021 and early 2022.
  3. Fundraising Trends: Chris discusses the bifurcation in the fundraising market, with capital being concentrated in large multi-strategy managers at the expense of smaller and newer funds. This trend is influencing the strategic decisions of private equity firms.
  4. GP Stake Sales: A significant portion of private equity firms are considering selling stakes in their own businesses. Chris outlines various motivations behind these sales, including succession planning, liquidity injection, and bringing in external expertise to enhance the firm’s capabilities.
  5. Valuation Gap and Deal Structures: The podcast explores the creative deal structures being employed to bridge the valuation gap between buyers and sellers. Chris highlights the increased use of deferred consideration mechanics, such as earnouts and vendor loan notes, to align the interests of both parties.
  6. Regulatory Environment: Chris delves into the evolving regulatory landscape, focusing on antitrust scrutiny and foreign direct investment regulations. He explains how these factors are shaping deal-making strategies and the need for private equity firms to navigate complex regulatory requirements.
  7. Private Equity Innovation: The discussion covers innovative liquidity solutions in the private equity space, including the rise of NAV facilities, collateralized fund obligations, and GP-led secondaries. These innovations are helping firms return liquidity to investors despite challenging market conditions.
  8. Technological Impact: Chris touches on the role of technology in private equity transactions, particularly in the context of regulatory compliance and deal execution. He discusses the potential for AI and other technologies to streamline processes and improve efficiency.
  9. Dechert’s Positioning: Chris outlines Dechert’s strategic positioning in the private equity market, emphasizing their global presence and expertise in complex transactions. He highlights the firm’s commitment to providing high-quality advisory services across various geographies and sectors.

Summary:

Chris Field provides a comprehensive overview of the current state of the private equity market, emphasizing the challenges posed by interest rates and the creative solutions being employed to navigate them. He discusses the evolving regulatory environment and the impact of technological advancements on deal-making. Dechert’s strategic positioning as a global leader in private equity advisory services is highlighted, showcasing their expertise in navigating complex transactions and regulatory landscapes.

#PrivateEquity #MergersAndAcquisitions #InterestRates #Fundraising #GPStakeSales #ValuationGap #DealStructures #RegulatoryCompliance #LiquiditySolutions #InnovationInFinance #Podcast #BusinessPodcast  #FinancePodcast #Entrepreneurship #ThoughtLeadership 

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Fund Shack is a private equity podcast and global media channel for alternative investment professionals.

If you are interested in appearing on the show, wish to propose a client, or are interested in sponsorship, contact:

Katie Mitchell
katie@linearb.media

Stephane Bacquaert

Private equity in Africa. A conversation with Stephane Bacquaert

Private equity is a great way of investing in uncertain, high growth environments. Strange then, that the African private equity industry is so small. In fact, Stephane Bacquaert of Adenia Partners argues that the Western, established private capital industry has systematically misunderstood the African opportunity, and in particular its risk profile.

In this Fund Shack podcast with Ross Butler, he talks about managing one of Africa’s largest control buyout funds, and the value that so many investors are missing out on.

Key Highlights:

  • Stephane’s Journey: Transitioned from strategy consulting to private equity in Africa, driven by personal connections and a desire to support African businesses. His initial venture failures led him to focus on supporting management teams through investment.

  • Investment Strategies: Emphasis on control buyouts and majority deals, which provide more influence over business outcomes. Investment decisions are driven by bottom-up analyses, focusing on companies with strong growth potential, robust management teams, and pricing power. Importance of being embedded locally to source and execute deals effectively, given the lack of structured deal flow and the necessity of relationship-based deal sourcing.

  • Market Dynamics: Africa’s high growth potential is driven by demographic trends, urbanization, and a burgeoning middle class. The continent’s economic fundamentals include rapid population growth, significant urban migration, and high GDP growth rates in several countries. These trends create opportunities in sectors such as consumer goods, retail, financial services, and infrastructure. Challenges include currency devaluation, regulatory complexities, and the need for infrastructure development.

  • Challenges and Opportunities: Navigating Africa’s complex regulatory landscape requires deep local knowledge and adaptability. Currency devaluation is a significant risk, necessitating investments in companies with strong local demand and pricing power. Building infrastructure is crucial, from establishing retail chains to upgrading production facilities.

  • Impact and ESG: Private equity investments in Africa have a profound impact on job creation and economic development. Adenia Partners focuses on improving ESG standards, such as transitioning companies to more sustainable practices and ensuring compliance with international environmental and social standards. Examples include the transformation of a retail chain in Kenya and the shift to water-based paints in East Africa. These efforts not only enhance business value but also attract international buyers and investors.

#PrivateEquity #AfricaInvestment #ImpactInvesting #ESG #VentureCapital #InvestmentStrategies #EmergingMarkets

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Fund Shack is a private equity podcast and global media channel for alternative investment professionals. Fund Shack is produced by Linear B Group.
Contact:
Katie Mitchell
Email: katie@linearb.media
Company: Linear B Group

Henry Freeman, The Fund Society, Fund Shack

Repackaging private equity, with Henry Freeman

Private equity fund managers are racing to find structures that will allow small private investors to invest with them. Meanwhile governments are introducing ELTFI and LTAF structures to encourage retailisation. Henry Freeman has been working at the nexus of public and private equity for two decades. And he has concerns.

Henry is founder of the Fund Society, an insight aggregator for investors, launching imminently. Sign up here for free and be among the first to benefit: https://thefundsociety.com/

An in-depth discussion with Henry Freeman, a seasoned investment manager and founder of the Fund Society. The conversation covers private equity’s accessibility to mass markets, the evolution of investment structures, and the launch of the Fund Society.

Key Highlights

Henry’s Journey: Henry Freeman has a diverse background in public and private investment markets, fintech entrepreneurship, and investment trust board membership. His career includes roles at Lloyds Private Bank, Foresight Partners, and Liberum, showcasing his extensive experience in managing and structuring investment funds.

Investment Strategies:

  • Semi-Liquid Structures: Emphasis on creating investment vehicles like LTIFs and ELTs that offer some liquidity while maintaining the benefits of private equity.
  • Commitment Focus: The critical role of commitment in private equity, arguing that commitment is a feature rather than a bug, essential for achieving the high returns associated with private equity investments.
  • Public-Private Hybrids: Development of funds that invest in listed private equity firms, providing liquidity and accessibility while capturing private equity’s growth potential.
  • Risk Management: Approaches to managing liquidity risk, including the potential for forced asset sales during market downturns and the implications for fund performance.

Market Dynamics:

  • Historical Discounts: Analysis of historical opportunities in listed private equity during the 2008 financial crisis and recent market conditions, highlighting significant discounts to net asset value (NAV) and the impact on investor returns.
  • Current Opportunities: Examination of current market conditions post-COVID, with a focus on identifying value in listed private equity and the potential for significant returns as market conditions stabilize.

Challenges and Opportunities:

  • Scalability Issues: Discussion on the scalability of closed-end fund structures versus open-ended vehicles, emphasizing the challenges and potential solutions for scaling private equity investments.
  • Mis-Selling Risks: Concerns about the risks of mis-selling private equity products to retail investors, particularly with open-ended structures that may not align with the traditional private equity investment model.
  • Technological Integration: The potential for leveraging technology, such as tokenization, to streamline the transfer and management of private equity interests, enhancing liquidity and accessibility.

Fund Society:

  • Platform Overview: Introduction to the Fund Society, an online hub for investment professionals, providing curated intelligence-based content, news aggregation, and thought leadership.
  • AI Integration: Use of AI and large language models to curate and prioritize content, ensuring relevance based on market trends and news events.
  • Community Building: Efforts to build a community of investment professionals, facilitating knowledge sharing and networking opportunities across asset classes.

#PrivateEquity #InvestmentStrategies #FundSociety #MarketDynamics #Commitment #InvestmentProfessional #LTIF #ELT

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Fund Shack is a private equity podcast and global media channel for alternative investment professionals. Fund Shack is produced by Linear B Group.
Contact:
Katie Mitchell
Email: katie@linearb.media
Company: Linear B Group

Daniel Zwirn, Arena Investors on Fund Shack private equity podcast

Avoiding moral hazard in private markets, with Daniel Zwirn

Daniel Zwirn is CEO of Arena Investors LP. In this episode of the Fund Shack private equity podcast, he talks to Ross Butler about the opportunities in private markets, and how to prosecute them in a way that truly aligns incentives with underlying investors.

Key higlights

  • Arena Investors’ Philosophy:
    • Historical Best Practices: Arena is inspired by successful financial models dating back to the 1600s, focusing on strategies from the Rothschilds, global grain traders, and Asian merchant houses.
    • Moral Hazard Prevention: Prioritizing structural advantages where Arena’s scarce resources (capital) are needed, reducing the risk of moral hazard.
  • Investment Strategies:
    • Cyclical and Opportunistic Investing: Identifying and exploiting cyclical opportunities across various sectors and geographies, avoiding overreliance on a single strategy.
    • Regulatory and Structural Arbitrage: Taking advantage of inefficiencies and regulatory differences across markets, providing a unique edge in capital deployment.
  • Market Dynamics and Opportunities:
    • Global Macroeconomic Trends: Analyzing the impact of QE, fiscal policies, and inflation on asset bubbles and market corrections, and strategically positioning investments accordingly.
    • Sector-Specific Strategies: Focused on distressed assets, special situations, and high-value sectors like real estate, structured finance, and commercial lending.
  • Operational Complexity:
    • Global Multi-Strategy Approach: Operating across North America, Europe, and Asia with a diversified portfolio including corporate, real estate, and structured finance.
    • Joint Ventures: Leveraging over 50 joint ventures worldwide for deep domain expertise, aligning interests, and maintaining variable cost efficiency.
  • Ethical and Social Responsibility:
    • Social Utility Investments: Focusing on investments that provide social benefits, such as healthcare and rehabilitation centers, while maintaining high returns.
    • Consistent Ethical Framework: Avoiding trends like greenwashing, with a focus on long-term ethical investment practices.

Daniel Zwirn highlights the importance of a disciplined, ethical approach to alternative investments, focusing on long-term value creation and strategic flexibility. His insights provide a comprehensive understanding of navigating private markets amidst evolving economic conditions.

#PrivateEquity #InvestmentStrategies #MoralHazard #MerchantBanking #ArenaInvestors #MarketDynamics

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Contact Information: About Fund Shack: Fund Shack is a private equity podcast and global media channel for alternative investment professionals. Fund Shack is produced by Linear B Group.
Contact:
Katie Mitchell
Email: katie@linearb.media
Company: Linear B Group

Private equity history, Hans Lovrek

Hans Lovrek on private equity’s ancient precedent

Hans Lovrek stumbled on Medieval Florentine documents that showed structures were being used to align interests in ventures with high information asymmetry that were uncannily similar to today’s limited partnerships.

Through a method of historical institutionalism, Hans demonstrates how the same techniques have been used to solve similar problems, down the ages, and that today’s private equity industry is based on ideas that successful trading nations have used before.

This episodes was recorded in March 2019 and is released on podcast for the first time in December 2023.

Medieval Foundations of Modern Private Equity – Hans Lovrek on Fund Shack’s Private Equity Podcast

Hans Lovrek, Founder of Commenda Private Equity uncovers the historical foundations of modern private equity by analyzing medieval Florentine documents, revealing structures similar to today’s limited partnerships. His method of historical institutionalism demonstrates how successful trading nations historically addressed information asymmetry, influencing contemporary private equity practices.

Historical Parallels:

  • Medieval Commenda and Modern LPs: Lovrek discovered that medieval commenda contracts from the 6th to the 14th centuries share striking similarities with today’s limited partnerships (LPs), highlighting features like profit sharing, limited liability, and limited duration.

Structural Analysis:

  • Profit Sharing: Medieval contracts typically had a 25% profit share for the general partner (GP), akin to the 20% carried interest in modern private equity.
  • Limited Liability: Essential for allowing families and other investors to participate without risking their entire fortunes.
  • Duration: Projects were financed for specific ventures (e.g., sea voyages) with fixed terms, similar to the ten-year lifespan of modern funds.

Regulatory Influence:

  • Role of Regulation: Increased regulation in Venice facilitated the rise of commenda contracts by providing a framework that reduced moral hazard and ensured fairness, leading to a thriving venture investment environment.
  • Comparison to Modern Regulation: The historical necessity of regulation for venture success parallels modern regulatory practices, suggesting that a codified international structure could simplify private equity investments.

Due Diligence and Moral Hazard:

  • GP Clawback: Medieval practices included mechanisms to ensure GPs returned excess profits if investments later underperformed, a concept still relevant today.
  • Challenges of Information Asymmetry: Both medieval investors and modern LPs face similar challenges in monitoring GPs and ensuring aligned interests.

#PrivateEquity #HistoricalInstitutionalism #LimitedPartnerships #Commenda #VentureFinance #MoralHazard

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Contact Information: About Fund Shack: Fund Shack is a private equity podcast and global media channel for alternative investment professionals. Fund Shack is produced by Linear B Group.
Contact:
Katie Mitchell
Email: katie@linearb.media
Company: Linear B Group

Yaron Valler on the Fund Shack venture capital podcast

A deep tech VC on the state of innovation

Yaron Valler is a founder of venture capital firm Target Global. He is a successful entrepreneur and investor, and was part of the team at Intel that invented the Pentium Processor. In this episode of the Fund Shack podcast, he talks to Ross Butler about how AI will change ‘everything’, virtual reality, how government’s should direct innovation and risk capital, and much more.

AI and Innovation in Venture Capital – Yaron Valler on Fund Shack’s Private Equity Podcast

Yaron Valler, Founder of Target Global discusses the transformative potential of AI, its applications across industries, and the role of governments in directing innovation and risk capital. Drawing from his background, including developing the Pentium processor at Intel, Valler provides insights into how AI will revolutionize sectors like healthcare, finance, and agriculture, and emphasizes the importance of strategic government investment to foster technological advancement.

Key Highlights:

AI’s Transformative Potential:

  • Widespread Impact: AI will profoundly affect various industries, including healthcare, finance, agriculture, and manufacturing.
  • AI Applications: From medical diagnostics to real-time tax classification, AI promises significant advancements in efficiency and capability.
  • Pattern Recognition and Innovation: AI excels in pattern recognition and generating new content, revolutionizing tasks like email composition and medical image analysis.

Large Language Models (LLMs):

  • Valuation Challenges: Overvaluation of LLM infrastructure could lead to market crashes. It’s crucial to evaluate LLMs based on their real-world applications and market potential.
  • Decentralization Potential: While AI might centralize around major providers, localized LLMs could also proliferate, allowing more decentralized AI applications.

Government’s Role in Innovation:

  • Strategic Investment: Governments should strategically direct investments to address inefficiencies and foster tech proliferation, particularly in underserved regions.
  • Public-Private Partnerships: Examples like Germany’s public-private tech initiatives highlight the benefits of collaborative investment in fostering innovation and regional economic growth.

Investment Trends and Future Technologies:

  • Augmented Reality and Quantum Computing: Valler is excited about the potential of augmented reality in daily life and the revolutionary impact of quantum computing on various industries.
  • Geographic Focus: Target Global is exploring investments in regions like Africa and the Arab world, recognizing their potential for significant tech-driven growth.

Yaron Valler’s insights emphasize the vast potential of AI to transform industries and highlight the strategic role of government in fostering innovation through targeted investments. His experience underscores the importance of evaluating AI technologies based on their real-world applications and long-term market potential.

#privateequty #AI #Innovation #VentureCapital #LLMs #GovernmentInvestment #TechProliferation

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Contact Information: About Fund Shack: Fund Shack is a private equity podcast and global media channel for alternative investment professionals. Fund Shack is produced by Linear B Group.
Contact: Katie Mitchell
Email: katie@linearb.media
Company: Linear B Group