tag:blogger.com,1999:blog-6321089372587128676.post8393423865523611194..comments2023-10-17T10:01:00.917-04:00Comments on Distressed Debt Investing: Notes from iGlobal's Global Distressed Investing Summit: Part 1Unknownnoreply@blogger.comBlogger4125tag:blogger.com,1999:blog-6321089372587128676.post-54587767399406088832012-02-14T18:59:21.978-05:002012-02-14T18:59:21.978-05:00True, although many PE firms now have the ability ...True, although many PE firms now have the ability to recycle during the entire investment period as well as add to existing portfolio companies during the harvest period.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-6321089372587128676.post-40096999749764049132012-02-13T17:08:28.928-05:002012-02-13T17:08:28.928-05:00I would frame the point differently. Because hedg...I would frame the point differently. Because hedge funds have evergreen pools of capital, any realization in their portfolio can be invested in another investment. Thus they can compound their capital through multiple investments, whereas private equity firms have to compound their investment through a single investment. IRR and multiple are inextricably linked, but the PE fund must look at a single transaction's IRR and multiple, where the hedge fund can simply focus on IRR.jnasrhttps://www.blogger.com/profile/03931940299269353542noreply@blogger.comtag:blogger.com,1999:blog-6321089372587128676.post-6105763934504352692012-02-13T11:32:58.909-05:002012-02-13T11:32:58.909-05:00From Author,
PE funds target a return that is 2x ...From Author,<br /><br />PE funds target a return that is 2x the capital invested, so if the fund starts off with $100mm, they must grow that to $200mm. They do not target an annual IRR on an individual investment per say. <br /><br />Also, when a PE fund invests its capital it executes a capital call to its LPs. If fund cannot deploy the amount of capital it wanted to in the investment (which may be the case with distressed loans or bonds) they will have difficulties achieving their hurdle. <br /><br />PE funds are structured differently from hedge funds. For one PE funds are not co-mingled the way hedge funds are. PE funds raise fund I,II, II etc, while hedge funds generally take money into a comingled pool (ignore on-shore/off-shore for simplicity) In exchange for locked up money, PE funds pay a pref return of 8-10% before they can receive any of their carried interest. This again influences their need to target a 2x return, rather than an annual IRR. <br /><br />I hope this was helpful.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-6321089372587128676.post-17002303047617309012012-02-10T23:14:27.304-05:002012-02-10T23:14:27.304-05:00"From a distressed PE perspective this has li..."From a distressed PE perspective this has limitations given their focus on a 2x return on capital, not an IRR. In many instances there is not enough of the loan available or the size of the issue itself does not allow for the deployment of sufficient capital to meet the return threshold."<br /><br />If anyone wants to take a moment to explain this concept, I'd appreciate it. THANKS!Anonymousnoreply@blogger.com