First time funds

1

• First time funds
• Should anyone invest?
• Mikan van Zanten
• Robeco Private Equity

2

• Setting the scene
• Private equity is an active investment class that
  requires a fair amount of skill, expertise and
  experience
• If that is so, do first time funds have what it
  takes?
• Key considerations
• How many first time funds are there?
• What defines the returns of first time funds?
• Are first time funds inherently more risky than
  follow on funds?
• What identifies the stars of tomorrow?

3

• Market overview
• Number of follow on funds increasing for first
  time since 2000
• Number of first time funds continues to decrease
• Flight to quality has made fund raising for
  first time funds more challenging

4

• Expectations
• E(rfund) ? ?(rmarket)
• Fundspecific characteristics Market
  characteristics
• or or
• What is different about this fund? How
  similar is this fund to the market?
• Experience Sensitivity to interest rates
• Network GDP growth
• Niche market Stock markets
• Access to financial markets Regulatory
  constraints

5

• Return example - U.S.
• VC
• Greater dispersion in follow on funds than first
  time funds
• Median return for follow on funds is LOWER than
  first time funds
• Pooled average return for follow on funds is
  HIGHER than first time funds

• BO
• Greater dispersion in follow on funds than first
  time funds
• Median return for follow on funds is HIGHER than
  first time funds
• Pooled average return for follow on funds is
  HIGHER than first time funds

6

• Finding the next generation of best managers
• Return data indicates that the larger follow on
  funds perform better
• This could well be based on
• succesful first time funds, allowing a manager to
  raise bigger funds
• some consistency in success of managers
• Note that at the same time, the median
  performance of follow on funds is lower
• Strategy - allocate disproportionately to the
  larger follow on funds of succesful first time
  managers
• Key question what defines a succesful manager
  only a few years into the life of a fund?

7

• Criteria
• Investing in first time funds requires elaborate
  expertise and experience to evaluate
• Unproven (?) strategies
• Unproven teams
• Lack of or unrealized track records
• Uncommon terms and conditions

8

• Contact
• Mikan van Zanten
• Partner
• Robeco Private Equity
• Coolsingel 120
• 3011 AG Rotterdam
• The Netherlands
• Tel. [phone]
• Fax [phone]
• E-mail private.equity_at_robeco.nl