Alternatives

All the articles about Alternatives
From newest to oldest

2008’s Long Shadow
by William Charlton, PhD, CFA, Managing Director and Head of Global Research & Analytics, Pavilion Alternatives Group, LLC.
Many attribute the unofficial start of the Global Financial Crisis to be the abrupt bankruptcy of Lehman Brothers on September 15, 2008, the largest bankruptcy in history. At this 10th anniversary of the initiation of the GFC it is worth reflecting on the divergent impact the GFC has had on the worlds of public and private equity investments.
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The economic cycle and the implications for private debt strategies
by John Hess, Head of Global Strategic Initiatives, Pavilion Alternatives Group Limited.
Regardless of where we are in the economic cycle, the most important observation is that there appears to be no imminent bad news out there. This absence of bad news is a key reason why we believe that risk assets likely will continue to perform well despite stretched valuations.
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How can two LPs in the same fund have different performance?
by Richard Pugmire, CFA, Managing Director, Pavilion Alternatives Group, LLC.
Many alternative asset managers use closed-end funds to execute their strategy. These funds have a finite life where capital is drawn from limited partners (LPs) over the first few years of the fund and is returned as investments are realized in the later years of a fund’s life.
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Game 4 Fund 3
by William Charlton, PhD, CFA, Managing Director and Head of Global Research & Analytics, Pavilion Alternatives Group, LLC.
Just as game four can be deterministic, raising and running a private equity fund three can be pivotal for fund managers.
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Private Credit
by Raelan Lambert, Managing Director, Pavilion Alternatives Group LLC.
Private credit markets have seen rapid growth in recent years as many institutional investors seek a broader opportunity set to increase returns in their fixed income portfolios. Consequently, private credit is enjoying a strong fundraising market. However, it appears that some fundamentals in private credit markets may be weakening.
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Energy and Infrastructure
by Jay Yoder, Managing Director, Pavilion Alternatives Group LLC.
Oil prices have enjoyed a steady recovery from their lows and are at a level where there are attractive investment opportunities in the energy private equity market. Even more promising is the evidence of increasing demand for oil. If the economic recovery continues and further increases demand, energy prices may well experience additional improvement.
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Buyouts
by Richard Pugmire, Managing Director, Pavilion Alternatives Group LLC.
In the U.S. buyout market, median EBITDA multiples remain high even though there has been a notable decrease in deal flow. Additionally, the exit market has been slowing even faster than the deal flow market. Despite this, institutional investors continue to be very interested in private equity and, as a result, fundraising remains strong.
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Venture Capital
by Jim Treanor, Managing Director, Head of North America Advisory Services, Pavilion Alternatives Group LLC.
The U.S. venture capital exit market has been slowing but, unlike the buyout market, deal flow is up for both earlystage and late-stage companies. However, venture capital fundraising has been moderating. Perhaps the biggest challenge facing the U.S. venture capital market is the IPO environment.
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Asia Pacific
by Peter Pfister, Managing Director & Head of Asia-Pacific Advisory Services, Pavilion Alternatives Group (Singapore) Pte Ltd.
In contrast to the mixed measures in both the U.S. and European markets, deal flow, exits, and fundraising are all up in Asia-Pacific private equity markets. While these trends are positive, many of the Asia-Pacific economies are substantially dependent on exports, which makes them very sensitive to economic performance in other regions of the world.
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European Fundraising
by Rhonda Ryan, Managing Director & Head of EMEA Advisory Services, Pavilion Alternatives Group Limited
Fundraising has been buoyant for several years and, three weeks into 2018, shows no signs of abating. According to Pitchbook, in 2017 EUR77.6 billion was raised by 117 European funds which was lower than the record EUR96.2 billion raised by 140 funds in 2016, but still very high by historical standards.
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Key Challenges Facing Private Markets in 2018
by Pavilion Alternatives Group
While the improving global economies should be generally beneficial to private markets, it remains true that developing broad-based exposure to private markets is unlikely to generate the appropriate return for the risk. Rather, selectivity remains paramount to building and maintaining a successful private markets portfolio.
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What Rising Rates Mean for Hedge Fund Returns After Fees
by Dan Covich, CFA®, CAIA®, FRM, Associate Director, Pavilion Alternatives Group, LLC and Alex Da Costa, Managing Director, Head of Hedge Fund Research, Pavilion Alternatives Group, a division of Pavilion Advisory Group Ltd.
As we continue to migrate towards a world of higher short-term interest rates, hedge funds and other active managers have the potential to capitalize on an environment of increased dispersion in global asset price movements. We have already seen hedge fund alpha begin to improve in certain areas, despite a record level of assets under management (“AUM”) in the hedge fund space.
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Private Credit: Is now a good time to invest?
by Raelan Lambert, Managing Director, Pavilion Alternatives Group, LLC
As we approach the eighth year of economic recovery, headlines abound on whether or not a recession is near and what may cause it. Risk-taking appears to be on the rise not only in the equity markets but also in the credit markets.
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Pop Song Portfolio Construction
by Dr. William Charlton, Ph.D., CFA, Managing Director & Head of Global Research & Analytics, Pavilion Alternatives Group, LLC
Musical purists could argue that Dire Straits “sold out” by employing a pop song strategy. Perhaps they did, but in giving fans what they wanted, the band was able to produce significant personal wealth while also gaining distribution of their non-pop music more widely than they likely would have otherwise.
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Keep Your Alpha, Give Me Delta
by Dr. William Charlton, Ph.D., CFA, Managing Director & Head of Global Research & Analytics, Pavilion Alternatives Group, LLC
It has become increasingly common to measure the performance of private equity fund managers against the performance of the public markets using Public Market Equivalents (PME). A PME is calculated by taking the historical cash flows from a fund manager and simulating an investment in a public market equity index.
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The Rise of Dark Powder
by Dr. William Charlton, Ph.D., CFA, Managing Director & Head of Global Research & Analytics, Pavilion Alternatives Group, LLC
In private equity, dry powder is measured as the difference between the total capital raised by active fund managers and the cumulative amount they have invested to date. Dry powder essentially measures the amount of capital that remains to be invested. Generally it is believed that higher dry powder levels will put upward pressure on private company purchase prices which, in turn, may result in lower returns to private equity fund managers.
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Hedge Fund Benchmarking and Increasing Absolute Returns
by Pavilion Alternatives Group
For many investors, the goal of allocating to hedge funds is to improve risk-adjusted returns, lower portfolio beta while increasing alpha, and/or dampen volatility through diversification. Investors can allocate to hedge funds to achieve these goals, but they can also invest in a mix of equities and bonds.
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Key challenges facing Private Markets in 2017
by Pavilion Alternatives Group
As 2017 unfolds, we can rest assured that the evolving landscape for private markets will continue to provide a dynamic set of challenges and opportunities to fund managers as well as experienced and newer entrants to the asset class. As with previous issues of Challenges, we take this opportunity to examine a number of interesting dynamics that will affect private markets in the coming year.
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due-diligence-in-latin-america-elvire-october-2016-1-copy Performing investment due diligence in Latin America
by Elvire Perrin, Managing Director, Pavilion Alternatives Group
Latin America still represents a small share of most institutional investors’ emerging market private equity portfolios. However, as results from EMPEA surveys of limited partners (LPs) show, Latin America (ex-Brazil) ranked first in 2012, 2014 and 2015, and third and fourth in 2013 and 2016, respectively, for fund investments amongst 10 other emerging market regions / countries.
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article-summary-view-1-copy Summary view of and experience in Private Credit strategies
by Pavilion Alternatives Group
Structural market developments, stretched valuations in traditional fixed income securities, heightened competition in private equity and fragile geopolitical and economic conditions help explain why private credit has been gaining an increasing level of attention. Similar to private equity, manager selection is critical in private credit.
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Co-Investment
by Dr. William T. Charlton, Pavilion Alternatives Group
Using an extensive Pavilion Alternatives Group database of investment transactions, we apply Monte Carlo simulation to a sample of realized transactions from buyout and growth funds to estimate the risk of co-investment portfolios. We find that co-investments with growth funds do not generate an attractive return profile under any circumstances. Conversely, buyout funds can offer appealing returns on both an IRR and a multiple basis.
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capital calls Key Challenges facing private markets in 2016
by Pavilion Alternatives Group
Each year, financial markets face an untold number of economic, political, and regulatory challenges around the world. Global private market participants face decisions in an ever-shifting investment landscape. 2016, not unlike previous years, will certainly provide many opportunities and risks for fund managers and the investors who provide capital to the private markets industry.
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capital calls European Small and Lower Mid Buyout Market
by Rhonda Ryan, Managing Director, Pavilion Alternatives Group
This research report focuses on the European small and lower-mid buyout market, which Pavilion defines as funds below €1.2 billion and funds targeting companies with an Enterprise Value (“EV”) of less than €500 million.
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Characterizing capital calls
by Dr. William T. Charlton, Managing Director, Pavilion Alternatives Group
This paper describes considerations that Private Equity General Partners (GPs) weigh in determining when to call capital from investors. Generally, there are myriad controlling factors that limit the likelihood that Private Equity GPs will call significant amounts of capital unexpectedly.
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A pacing model will help develop the optimal private markets allocation
by Richard Pugmire, Managing Director, Pavilion Alternatives Group
Alternatives often use a closed fund structure where investors commit capital to a fund and the fund managers choose when to draw and return capital. Most of the capital is drawn the first three-to-five years and returned over the subsequent three-to-seven years.
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Hedge Fund and Portfolio Risk Management: Keys to a successful risk management process
by Mathieu Larochelle, CFA, CAIA, Vice President, Pavilion Alternatives Group
We separate risk management into two categories: market risk (which should be rewarded with commensurate performance) and non-market or business / operational risk, which only can impact fund performance negatively and should not be rewarded. This article will focus largely on the former type.
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Private Equity Market Outlook for 2016
by Allen Waldrop, CFA, Managing Director, Pavilion Alternatives Group
Each year, we assess trends and market opportunities in private equity. In this article, we look at PE market opportunities for 2016 across different markets.
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European private equity and M&A markets performing strongly
by Christopher Farrington, Director, Pavilion Alternatives Group
The European Union (EU), as a single market, is the largest economic block in the world, representing 26% of global GDP. The EU’s member states represent five of the 10 largest economies in the world resulting in a fundamentally prosperous region characterized by open and innovative market-based economies.
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Developing a co-investment program
by Daniel Fuller, Vice President, Pavilion Alternatives Group
Preqin, an alternative assets analytics firm, recently published research indicating that 77% of private equity investors pursue direct investments into companies alongside general partners (co-investments) on an active or opportunistic basis.
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Private equity fees require dynamic due diligence
by Allen Waldrop, CFA, Managing Director, Pavilion Alternatives Group
As a category, private equity funds are known to have some of the highest and most complex fee structures in the investment world. In this article, we examine the fee categories which tend to have greater variability and have attracted more attention from the SEC of late.
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Publication thumbnail Key challenges facing private market in 2015
Pavilion Alternatives Group continues to focus its efforts on assessing the global private marketplace to understand current opportunities and risks that will affect market participants, particularly General Partners (“GPs”) and the Limited Partners (“LPs”) who provide capital to the private markets industry.
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Publication thumbnail Liquid Alternative Investment Strategies
by Richard P. Marra, Senior Consultant, & Brian Traynor, Research Analyst
Alternative assets are an important component of an institutional investment portfolio as they can add true diversification to portfolios and reduce reliance on long positions in stocks, bonds and cash for total return.
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Private Equity Market Outlook for 2015
by Allen Waldrop, CFA, Managing Director, Pavilion Alternatives Group
While we place a significant amount of importance on diversification, we believe manager selection also should be a primary focus as each sub-strategy will have managers with demonstrated ability to generate value across multiple economic cycles.
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Mitigating hedge fund operational risk requires diligent attention
by Mathieu Larochelle, CFA, CAIA, Vice President, Pavilion Alternatives Group
The objective of this article is to explain operational risk, show the evolution of operational due diligence (ODD) and demonstrate the importance of ODD in the manager selection process. We also explore two key areas of a typical ODD review.
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The Changing Face of Hedge Fund Investing
by Alex Da Costa, Director, Pavilion Alternatives Group
The objective of this article is to show how the hedge fund industry has grown from a small, opaque, niche sector directed towards high net worth investors into a large, transparent, and institutional-quality fund management business.
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Publication thumbnail The Rise of the Private Equity Secondary Market and Benefits of a Dedicated Allocation
by Casey Stevens, CFA, Consultant
The secondary market for private equity dates back to the early 1980s when the first dedicated secondary firms, Venture Capital Fund of America and Landmark Partners, were formed exclusively to purchase private equity interests from limited partners (LPs) under distress.
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Investing in Unlisted Infrastructure: An Institutional perspective
by Philip Coté, CFA, FRM, Vice President, & Michael McMurray, CFA, Senior Consultant
Infrastructure is a relatively new investment category that traces its roots back to the mid-1990s in Australia. At that time, the Australian government raised much needed capital by selling government assets to private investors.
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Publication thumbnail Liquid Real Assets
by Anton Loukine CFA, CAIA, CIO of Implemented Solutions
With interest rates in most of the developed countries near zero in nominal terms and negative in real terms, investors are increasingly looking for ways to protect their capital against the erosion of purchasing power as well as unexpected changes in interest rate term structure and inflation.
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Publication thumbnail Institutions Look to Global Macro for Diversification
by Kerry Elsass, CAIA, Consultant
Without a doubt, 2008 was a challenging year for hedge funds. The HFR Fund Weighted Composite Index plunged 19% in 2008, disappointing investors who trusted hedge funds to protect on the downside.
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