How much #Maths is needed in Private Equity (also when compared to Hedge Funds or Investment Banking for example)?
@CAIAAssociation @CAIA_Blog
Private Equity requires a good understanding of Finance and especially sector-specific finance such as Real Estate Finance Investments
@CAIAAssociation @CAIA_Blog
Private Equity requires a good understanding of Finance and especially sector-specific finance such as Real Estate Finance Investments
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!
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 down => 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!
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.
Computing IRR - internal rate of return, modified IRR and Adjusted IRR alongside the two essentials for every deal are the Entry and Exit Multiples.
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.
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.
Your legal and due diligence skill sets should also be strong!
Your legal and due diligence skill sets should also be strong!
But the kind of Math you find in derivatives and structured products is not usually applied in the PE Industry by Industry Participants and experts.
It is more dominated by Accountants and Corporate Finance Experts and their language of communication.
It is more dominated by Accountants and Corporate Finance Experts and their language of communication.
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