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!
Unless you are doing financial risk management assignments, which means you will be applying the standard tools that are used elsewhere, such as VaR ( translates into ICAR - Invested capital at risk in the PE Industry). But do note: that PE data is not easily available.
Thomson Reuters CSF has a database that is normally used by SWFs - Sovereign Wealth Funds and other Islamic Banks that invest big time in this area in the GCC!
Vintage samples are available, but vintage year selection for computing Relative VaR and attribution analytics is a decision left to the Investment / Risk Analyst.
Free - cash flow modelling and other DCF Methods are commonly used to price transactions and buy-side deals.
Computing IRR - internal rate of return, modified IRR and Adjusted #IRR alongside the two essentials for every deal are the Entry and Exit Multiples, which is set the industry standard by now!
PE - Portfolio Management can be done using either the TOP DOWN or Bottom-up Methodologies!
Quite similar to what grads do after studying portfolio and investment management modules.
Quite similar to what grads do after studying portfolio and investment management modules.
Analysis of deal flows and judging their quality is more of an art! you need to have the right kind of sector-specific knowledge and/or industry-oriented experience before you can make an investment authorization.
But the kind of Math you find in #derivatives and structured products is not usually applied in the PE Industry by General and Limited Partners and their Corporate Finance experts.
It is more dominated by MBAs and their taxonomy.
It is more dominated by MBAs and their taxonomy.
@threadreaderapp unroll
• • •
Missing some Tweet in this thread? You can try to
force a refresh
