The Limited Partners Summit Europe

1

• The Limited Partners Summit Europe
• Picking The Right Emerging Managers At This
  Event!
• Panel discussion
• 18 May 2005

2
Panel Participants

• Emerging Managers
• Jarrett Collins, Managing Director, NeoCarta
  Ventures, Inc.
• Robert Wilhelm, Managing Partner, Solid Capital
  Partners
• Tom McConnell, General Partner, Vanguard Ventures

• Panelists
• Jens Bisgaard- Frantzen, Managing Partner, ATP
  Private Equity Partners
• Ivan Vercoutere, Managing Partner, LGT Capital
  Partners

Panel Chair Armando DAmico Managing
Partner Acanthus Advisers LLP
3
Panel format

• The LPs will discuss how they choose their
  emerging managers and how they work with them
• The emerging managers will have 3-5 minutes
  (max!) to introduce themselves to the group
• The panelists will then have 10 minutes for QA

4

• Setting the stage

5
Investors are creating emerging manager
programmes

• Several US institutions have sought to set up
  portfolios of next generation managers
• California State Teachers Retirement System
• Los Angeles County Employees Retirement
• New Mexico Public Employees
• New York City Retirement System
• New York State Teachers Retirement System
• University of Texas Investment Management Co.
• State of Connecticut Retirement System
• ..and a number of leading European investors
  have similar programmes

6
Emerging managers in EuropeRecent trends
over 10 billion
Source Acanthus
7
Emerging managers what drives investors
interest?

• Pros
• Hungry, motivated, entrepreneurial
• Fresh blood, challenge status quo
• Differentiated strategy
• Diversification
• Establish early relationship with potential
  future dream teams
• Better LP alignment
• Potential for high Alpha

• Cons
• Team risk
• Mixed track record
• Doubts over deal flow
• Internal processes not in place
• Market position not established
• Market may be crowded
• Higher risk, more DD
• work for LPs!

8
Investors strategies vary widely with regard to
emerging managers
we do emerging managers but not in venture
we like spin outs
we dont do first time funds
we seek proactively new teams to sponsor so as
to get a portion of carry and of mgt co
we are prepared to do Funds II, III, and IV
we do first time funds but not first time teams
we look specifically for first time funds
9
Steady supply of new managersUS data
Source Franklin Park LLC, Venture Economics
10
Steady supply of new managersUS data
Source Franklin Park LLC, Venture Economics
11
Return variability

First Time Funds

Non-First Time Funds


Source Venture Economics, Franklin Park LLC
Analysis
12
A sample of due diligence issues

• Potential conflicts of interest
• Economic arrangements (particularly when a
  sponsor is involved)
• Attribution analysis
• Why does the market/segment need this fund?
• Consistency of strategy with previous experience
• Is team fully formed to exploit the opportunity?
  Any skill sets missing and how will they be
  addressed?
• Why is team coming together exciting opportunity
  or no other opportunity?
• More extensive reference checks

13
Sponsored or cornerstoned funds

• A whole new set of issues
• Comprehensive due diligence two teams in one
• Understand the deal more fully economics and
  governance issues
• Explicit v hidden influence
• How significant is the value being added?

14
Questions for the panel

• Define emerging managers
• Why do you invest in emerging managers?
• Is the supply of emerging managers increasing?
  Why?
• Is there room for new managers?
• How do you select emerging managers? Is your due
  diligence different?
• How do you regard sponsored funds?
• Do you take action to support their fund raising?
• Are you more hands-on in your monitoring?

15
Acanthus Advisers

• Firm profile
• Independent fund placement and corporate advisory
  firm focused on private equity, founded in 1998
• Fund focus 100-500m any stage providing
  fundraising, investor relations and strategic
  advice
• Corporate advisory focus private transactions
  10-150m EV
• Armando DAmico Managing Partner
• 20 years experience in private equity, banking
  and strategy consulting
• Senior banker at EBRD - 700m fund of funds
• Special adviser to Euro Private Equity Partners
  (FOF)
• Ten years strategy consulting Europe/US (Bain
  Co., Alliance, Telesis)
• M.Sc. Civil Engineering, INSEAD MBA