Case Studies

WITH GREAT SUCCESS COMES A REPUTATION FOR RESULTS

Non-Discretionary Investment Advisor

A large institutional investor, enlisted our services to develop a diversified, top quartile private equity program that could be fully integrated into a broader investment platform.

Planning

In partnership with a client’s investment organization, we jointly developed an annual private equity investment plan. The plan was synchronized with the client’s overall asset allocation model which includes the public equity, fixed income, international equity and real estate asset classes. The annual private equity investment plan encompasses allocations for various private strategies that we believe will generate outsized returns while maintaining diversification. The plan includes specific allocations for buyouts, growth equity, venture capital, distressed debt, and other niche strategies such as investments in Europe, Asia, emerging markets, mezzanine financing and leveraged loan funds. We utilize a proprietary pacing model to forecast short-, medium- and long-term private equity exposure as it relates to overall asset allocation and private equity investment objectives.

Investment Identification, Access and Plan Implementation

We have typically seen well over 300 opportunities a year, and because we have historically invest an average of $4 billion in commitments annually, we have broad based access to a large majority of private equity funds that are seeking capital. Using our proprietary, institutionalized investment process, which has been continually refined since 1990, we are able to thoroughly evaluate a plethora of managers and strategies to ultimately identify the best-of-breed managers. We continually seek to pair our client with the top managers based on the client’s annual private equity plan.

Investment Decision Making

We regularly communicate our views to the client’s investment organization and share our research and market knowledge including periodic sector reviews conducted by our specialized research teams. We recommend investment ideas to the client based on the portfolio fit of each investment opportunity, and if it meets the client’s objectives, we recommend the investment opportunity to the client’s investment committee which will make the final investment decision.

Post Investment – Portfolio Monitoring and Reporting

Our Portfolio Monitoring & Reporting department reviews every investment to evaluate its conformity with the program’s objectives. Furthermore, we examine capital call notices to confirm the accuracy of all calculations for each client. This includes a management fee analysis which compares the management fee being called to the guidelines required by each fund’s Limited Partnership Agreement. We track every capital distribution to determine appropriate preferred return, carried interest, return of capital and capital gain calculations, and we review every amendment to the partnership agreement to determine whether it is in the best interest of the client. This focus on continuing diligence and compliance reveals potential issues so that we may recommend creative and constructive solutions.

Result

The client's private equity program has been regularly cited by the investment marketplace as among the best private equity programs in the industry. The program has generated top quartile private equity returns for many years, and its investment results have exceeded most peers.*

* Past results may not be indicative of future performance.

Discretionary Investment Management

A mid-size institutional client wanted to gain exposure to the private equity asset class; however, the investment organization was relatively small with minimal private equity experience. PCG AM was contracted to manage the private equity program on a discretionary basis.

Planning

Our client worked with PCG AM to develop and establish an investment plan that incorporated portfolio investment objectives to address risk tolerance and targeted capital deployment.

Execution

Leveraging PCG AM’s industry access, relationships and “buying power”, we were able to construct a diversified private equity portfolio to meet the client’s annual investment objectives and guidelines by investing in a portfolio of best-of-breed managers addressing multiple strategies, geographies, and styles.

Communication

We developed customized investment reports for the client, which are generated and delivered to their investment organization and board on a quarterly basis. Additionally, we make periodic presentations to the client’s board of directors and investment committee, at the client’s request, where we discuss overall investment performance, new investments, prior investments and our investment outlook. We also work closely with the client’s staff to further educate them on private equity topics of interest.

Results

In addition to a top quartile private equity investment portfolio, the client’s entire investment organization has gained a sophisticated understanding of private equity, including knowledge of different sectors such as buyouts, growth equity, venture capital, distressed debt.

Co-Investment and Direct Investment Advisory Services

A client had a desire to learn about and invest in emerging new energy technologies.

Execution

We were engaged to help identify new, relevant investment opportunities in the alternative energy sector, develop deal-flow of co-investments from private equity funds, conduct due diligence, assist in the structuring and negotiation of transactions, and conduct ongoing monitoring of their alternative energy investment portfolio.

Result

PCG AM has leveraged its specialized sector research, which includes an energy-focused team, and since the start of the engagement, we have identified numerous investment opportunities for the client. We continue to provide portfolio monitoring services, as well as strategic advice with regard to investment and sector strategy.

Secondary Sale

PCG AM was retained by one of its clients to review active management strategies to help generate liquidity and reduce the institution's overall administrative burdens.

Execution

Ultimately, we advised this client to sell a select non-core portion of its private equity portfolio on the secondary market. To execute this plan, PCG AM conducted a strategic review of the client's private equity program to determine which portfolio of non-core fund interests would generate the greatest amount of liquidity. We then valued these assets using our proprietary database and analytics and provided this data to select secondary firms and institutions that acquire seasoned funds and portfolios. Given our market presence, we were able to identify a targeted list of potential buyers that would maximize the overall purchase price. PCG AM then addressed all questions and information requests from this bidder pool and created an online data site to facilitate the bidding process. At the conclusion of the bidding process, PCG AM prepared a summary of all the bids and opined on the most attractive offers from both an economic and probability of completion standpoint.

Result

The client was very pleased with the end result, as PCG AM was able to secure a purchase price above 90% of the portfolio's net asset value ("NAV") - a particularly impressive result given that most secondary sales in the latter half of 2008 were priced at a 30-40% discount to NAV.*

* Past performance may not be indicative of future results. The client identified above is the client that PCG Asset Management advised on secondary purchase in 2008. It is not known whether the client approves or disapproves of PCG Asset Management or the advisory services provided.

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