Discover and read the best of Twitter Threads about #irr
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How much maths is needed in #private #equity (also when compared to hedge funds or investment #banking, for example)?
@GAIAnoburn @CAIA_Blog
@GAIAnoburn @CAIA_Blog
Private Equity requires a good understanding of Finance and especially sector-specific finance such as Real Estate Finance and Investments and so on.
In my opinion, the techniques used to model PE transactions have a lot in common with those that are applied to Listed Equity.
In my opinion, the techniques used to model PE transactions have a lot in common with those that are applied to Listed Equity.
It has some maths in it, but nothing out of the world!
1/ Thread - IRR fallacy: IRR is one of the most abused and misunderstood metrics in finance.
Used for false marketing by PE GPs and misused even among experienced LPs.
If EBITDA is bullshit earning, IRR is bullshit return.
#IRR #EBITDA
Used for false marketing by PE GPs and misused even among experienced LPs.
If EBITDA is bullshit earning, IRR is bullshit return.
#IRR #EBITDA
2/ Many claim Buffett is “pretty good private equity manager” who happened to structure permanent equity and compound over long period.
Well, let’s examine two cases why 20% compounded return and 20% IRR by PE funds are just different animals
#IRR
Well, let’s examine two cases why 20% compounded return and 20% IRR by PE funds are just different animals
#IRR
3/ For a $500M fund with $100M drawdown and exit, to achieve 20% IRR (top quartile in most cycle), $700M of wealth made. $700M wealth for $500M or commitment over 10 years is solid but not great especiallly before fees 
