Gary Gensler, the new chair of the SEC on SPACs and PIPE
SPACs are rather costly exercises in financial engineering. Some sponsor raises $200 million or $2 billion or whatever and takes 20 percent — I repeat, 20 percent. For what? For a blank-check company that gets about two years to go find a company to take public. And then many of the early shareholders — from the institutional and larger shareholders to hedge funds — redeem out. The retail public is left bearing that early 20 percent loss and all the other bankers’ costs and lawyers’ costs.
Then another group of investors comes in called “private investors in the public equity.” And they come in, often, with a little bit more information [than retail investors have] for a handful of days. That whole system, even if fully disclosed, has a lot of cost — and I’m not sure it’s fully disclosed yet. We’re working on enhancements to the disclosure and also on a lot of the inherent conflicts.
SPACs are rather costly exercises in financial engineering. Some sponsor raises $200 million or $2 billion or whatever and takes 20 percent — I repeat, 20 percent. For what? For a blank-check company that gets about two years to go find a company to take public. And then many of the early shareholders — from the institutional and larger shareholders to hedge funds — redeem out. The retail public is left bearing that early 20 percent loss and all the other bankers’ costs and lawyers’ costs.
Then another group of investors comes in called “private investors in the public equity.” And they come in, often, with a little bit more information [than retail investors have] for a handful of days. That whole system, even if fully disclosed, has a lot of cost — and I’m not sure it’s fully disclosed yet. We’re working on enhancements to the disclosure and also on a lot of the inherent conflicts.
What Is An Accredited Investor? – Forbes Advisor
https://www.forbes.com/advisor/investing/what-is-accredited-investor/
https://www.forbes.com/advisor/investing/what-is-accredited-investor/
Forbes Advisor
What Does It Take To Be An Accredited Investor?
Certain types of exotic investment assets like hedge funds, venture capital and startup companies are off-limits for regular investors. That's because these types of companies are exempt from rules and regulations that were designed to protect investors from…
27 Best Private Equity Investing Books of All Time - BookAuthority
https://bookauthority.org/books/best-private-equity-investing-books
https://bookauthority.org/books/best-private-equity-investing-books
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The accelerating growth in the investment and wealth management market has coincided with increased regulation of the financial services sector. In particular, PE funds and managers face a number of rules on
how they should be organised (e.g. AIFMD),
what they should report (e.g. FATCA/CRS),
what reviews they must carry out (EU 4th AML Directive) and
how they protect personal data of their clients (GDPR).
how they should be organised (e.g. AIFMD),
what they should report (e.g. FATCA/CRS),
what reviews they must carry out (EU 4th AML Directive) and
how they protect personal data of their clients (GDPR).
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In data: Gender and ethnic diversity in European VC | Sifted
https://sifted.eu/articles/diversity-data-european-vc/
https://sifted.eu/articles/diversity-data-european-vc/
Sifted
In data: diversity in European VC
VCs and PE firms in Europe are making (slow) progress on gender diversity — and finally starting to track their teams' ethnic diversity.
Evergreen Funds
Unlike traditional closed-ended investment funds, an open-ended structure has no termination date and capital can be raised, repaid, or transferred on an ongoing basis. The name open-ended fund, evergreen fund, or permanent capital vehicle is liberally used to describe a fund with no end-date. The only core distinction is that evergreen funds are permitted to recycle capital after an exit while open-ended funds distribute it to investors. The core advantage of such funds are that they have more flexibility. Without an end date and with the ability to raise more capital, they can truly focus on long-term capital appreciation for investors.
Unlike traditional closed-ended investment funds, an open-ended structure has no termination date and capital can be raised, repaid, or transferred on an ongoing basis. The name open-ended fund, evergreen fund, or permanent capital vehicle is liberally used to describe a fund with no end-date. The only core distinction is that evergreen funds are permitted to recycle capital after an exit while open-ended funds distribute it to investors. The core advantage of such funds are that they have more flexibility. Without an end date and with the ability to raise more capital, they can truly focus on long-term capital appreciation for investors.
Clawback
Given the complex issues surrounding the carry
calculations and the timing of payments, it is possible that a sponsor may receive on an interim basis during the fund’s life, and/or would have received at the end of the fund’s life, more carry than it is properly entitled to when viewed across all of the fund’s investments. Such distortions could arise for a number of reasons, including where there is:
1. a decline in the profitability of the fund over the course of its life; or
2. the immediate sale of successful and profitable investments but a delay in the realisation of unsuccessful unprofitable investments.
The perceived risk that a sponsor may receive more carry than originally intended is greater where a fund uses the deal-by-deal type model rather than the whole-fund model, as these models allow for carry to be paid to the sponsor relatively quickly before all of the investments have been realised and accounted for. Investors therefore often insist on additional contractual protections to prevent excess carry being distributed. The main contractual protection is a clawback clause, whereby the sponsor agrees that the investors can claw back excess carry that the sponsor has received and return these amounts to the fund.
Given the complex issues surrounding the carry
calculations and the timing of payments, it is possible that a sponsor may receive on an interim basis during the fund’s life, and/or would have received at the end of the fund’s life, more carry than it is properly entitled to when viewed across all of the fund’s investments. Such distortions could arise for a number of reasons, including where there is:
1. a decline in the profitability of the fund over the course of its life; or
2. the immediate sale of successful and profitable investments but a delay in the realisation of unsuccessful unprofitable investments.
The perceived risk that a sponsor may receive more carry than originally intended is greater where a fund uses the deal-by-deal type model rather than the whole-fund model, as these models allow for carry to be paid to the sponsor relatively quickly before all of the investments have been realised and accounted for. Investors therefore often insist on additional contractual protections to prevent excess carry being distributed. The main contractual protection is a clawback clause, whereby the sponsor agrees that the investors can claw back excess carry that the sponsor has received and return these amounts to the fund.