“A must-have reference for any equity portfolio manager or MBA student, this book is a comprehensive guide to all aspects of equity portfolio management, from factor models to tax management.” ERIC ROSENFELD, Principal & Co-founder of JWM Partners
“This is an ambitious book that both develops the broad range of artillery employed in quantitative equity investment management and provides the reader with a host of relevant practical examples. The book excels in melding theory with practice.” STEPHEN A. ROSS, Franco Modigliani Professor of Financial Economics, Massachusetts Institute of Technology
“The book is very comprehensive in its coverage, detailed in its discussions and written from a practical perspective without sacrificing needed rigor.” DAVID BLITZER, Managing Director and Chairman, Standard & Poor's Index Committee
“Making the transition from the walls of academia to Wall Street has traditionally been a difficult task…This book provides this link in a successful and engaging fashion, giving students of finance a road map for the application of financial theories in a real-world setting.” MARK HOLOWESKO, CEO and Founder, Templeton Capital Advisors
“This text provides an excellent synthesis of a broad range of quantitative portfolio management methods…In addition, there are a number of insightful innovations that extend and improve current techniques.” DAN DIBARTOLOMEO, President and Founder, Northfield Information Services, Inc.
Quantitative Equity Portfolio Management is a comprehensive guide to the entire process of constructing and managing a high-yield quantitative equity portfolio. This detailed handbook begins with the basic principles of quantitative active management and then clearly outlines how to build an equity portfolio using those powerful concepts.
Financial experts Ludwig Chincarini and Daehwan Kim provide clear explanations of topics ranging from basic models, factors and factor choice, and stock screening and ranking…to fundamental factor models, economic factor models, and forecasting factor premiums and exposures.
Readers will also find step-by-step coverage of portfolio weights… rebalancing and transaction costs…tax management…leverage…market neutral…Bayesian _…performance measurement and attribution…the back testing process…and portfolio performance.
Filled with proven investment strategies and tools for developing new ones, Quantitative Equity Portfolio Management features:
A wealth of down-to-earth financial examples and case studies
Each chapter of this all-in-one portfolio management resource contains an appendix with valuable figures, tables, equations, mathematical solutions, and formulas. In addition, the book as a whole has appendices covering a brief history of financial theory, fundamental models of stock returns, a basic review of mathematical and statistical concepts, an entertaining explanation and quantitative approach to the casino game of craps, and other on-target supplemental materials.
An essential reference for professional money managers and students taking advanced investment courses, Quantitative Equity Portfolio Management offers a full array of methods for effectively developing high-performance equity portfolios that deliver lucrative returns for clients.
About the Authors
Ludwig B. Chincarini, Ph.D., CFA, is a professor of finance at Georgetown University as well as a financial consultant to institutional investors. Previously, he was director of research at Rydex Global Advisors, the index mutual fund company. Prior to that, Dr. Chincarini was director of research at FOLIOfn, a brokerage firm that pioneered basket trading. He also worked at the Bank for International Settlements and holds a Ph.D. in economics from the Massachusetts Institute of Technology.
Daehwan Kim, Ph.D., is a professor of economics at the American University in Bulgaria. Previously, he was employed as a financial economist for FOLIOfn. Dr. Kim also worked as a financial journalist, writing regular columns on financial markets for business media in Asia. He also holds a Ph.D. in economics from Harvard University.
Customer Reviews:
The book on factor models.......2007-08-22
Should you buy this book if you already have Grinold and Kahn? Emphatically yes, if you are interested in factor models of equity returns: about 200 pages of CK are devoted to them, compared to a few in GK.
If not, I would still recommend the purchase, but expect CK's stay on your bookshelf to be brief - enough time to read through, and spot things not found in GK. (E.g., discussion of leverage and tax management).
If you have not read Grinold and Kahn, start with this one - it is more accessible, and Chincarini and Kim offer a steady flow of worked-out examples, plus a nice collection of end-of-chapter questions - but do graduate to the GK tome.
Alas, just as GK, CK is a book for MBAs: neither reflects state-of-the-art (state-of-the-art in late 1980s, perhaps?), and each one gets sloppy when more math is called for: GK sags in the part on information analysis, and CK in Chapter 14, 'Bayesian alpha'. Statistics? Just use OLS.
Finding good up-to-date reading on QEPM thus remains a challenge, but CK (as well as GK) is a worthwhile book to read in the beginning.
Excellent Book - Highly Recommend.......2007-01-25
This is a strong learning guide as well as a useful reference. The book takes the subject of portfolio management the next logical step after a fourth year finance course. The classic topics of undergrad finance are taken to a new level. For example, the book assumes the reader previously understands Mean variance optimization, the topics are Mean variance optimization with constraints and/or transaction costs. Also an excellent introduction to Factor models in context of forecasting security pricing. Highly recommend.
A practical entry-level quant equity portfolio management book.......2006-12-01
This is a very practical entry-level quant equity portfolio management book (more practical and easier than Grinold & Kahn's book). It's a good place to start if you are interested in building quant models to manage equity portfolios. The book started from the beginning (e.g., how to pick factors), to how to build models to forecast returns, risk, and how to run optimization. This book didn't get into enough details about econometrics, database management, optimization, and programming, which are all essential to build a robust quant model. The authors mentioned pooled time-series cross-sectional econometric models, but didn't go beyond the surface. Overall, it's a good introduction book, but could be better.
A very readable primer on quantiative equity portfolio management.......2006-09-07
In my opinion, this book should be on the bookshelf of every quantitative equity portfolio manager right next to his Grinold & Kahn. In addition to the basics, it covers a lot of the more practical aspects of quantitative euqity portfolio management compared to the Grinold & Kahn, but is not lacking any academic rigour. It is very readable and accessible for anyone with a professional finance background or interest.
Book Description
School Finance: Achieving High Standards with Equity and Efficiency explores traditional economic and political models and contemporary issues within the current social, political and economic context. It enables readers to see the political and judicial forces at work in shaping school finance policy. It also provides the reader with tools drawn from economics to analyze the impacts of those policies in terms of equity, adequacy, efficiency, and liberty. Readers examine the financial implications of systemic reform, including centralized goal setting and accountability via standards, curricula and testing; decentralized reforms via school-site decision making; and family choice of schooling through charter schools and vouchers for low-income families. School finance experts, political analysts, school administrators.
Book Description
The treatment in Analysis of Equity Investments: Valuation is intended to communicate a practical equity valuation process for the investment generalist. Unlike many alternative works, the book integrates accounting and finance concepts, providing the evenness of subject matter treatment, consistency of notation, and continuity of topic coverage so critical to the learning process.
The book does not simply deliver a collection of valuation models, but challenges the reader to determine which models are most appropriate for specific companies and situations. This book contains many real-life worked examples and problems with complete solutions. In addition, the examples and problems reflect the global investment community.
Chapter 1 describes how an analyst approaches the equity valuation process.
Chapter 2 begins with the basic John Burr Williams dividend discount model (DDM) and discusses the derivation of the required rate of return within the context of Markowitz and Sharpe's modern portfolio theory (the capital asset pricing model).
Chapter 3 shows how the DDM approach can be modified to a free cash flow (FCF) approach. Considerable attention is devoted to forecasting FCF and its relationship both to the firm (FCFF) and to equity (FCFE).
Chapter 4 takes a somewhat different approach to equity valuation by using Graham and Dodd-type concepts of earning power and associated "Market Multiples." The most familiar of these is probably the price-to-earnings ratio, but there is also merit to using price to book value, price to sales, price to cash flow, enterprise value to EBITDA, and price to dividends.
In Chapter 5, the authors present residual income models. The authors demonstrate how to calculate residual income and discuss the accounting adjustments necessary to estimate single-stage and multistage residual income valuation.
Customer Reviews:
Must-have reference for students!.......2007-07-26
As an undergraduate Finance student prepping for the C.F.A. exam, I must say this is the best textbook I have seen on valuing equities. Clearly written by experienced C.F.A.'s, this guide to valuation has been more helpful and easier to use than any of the textbooks used in my finance classes.
It is well organized, making it easy to read as a single pass-through and to use as a reference for specific topics. The best thing about its writing style is the plentiful examples. Pages of practice problems and step-by-step demonstrations leave the reader with no misunderstanding of the material.
Some important topics covered include methods of valuation (discounted dividend, discounted cash flow, multiples, and the less popular residual income), methods of obtaining discount rates/required return, and other helpful information such as how analyst research reports are structured. Each topic is covered in great detail, encompassing just about every aspect an analyst should know and more. Do not expect to remember everything - I suggest building your own spreadsheet models using this book as a reference to help reinforce the information.
If you are a college student or studying for the C.F.A., this is a necessary book to have in your arsenal. If will provide clarity where other books do not suffice.
Book Description
"Glenn Singleton and Curtis Linton have offered us an important book that provides us with empirical data and well-constructed exercises to help us think through the ways that race affects our lives and our professional practices. My sincere desire is that after you have had an opportunity to read this volume you will, indeed, engage in some courageous conversations about race."
-Gloria Ladson-Billings, Professor
University of Wisconsin-Madison
Author,
The Dreamkeepers
". . . challenges educators to talk in honest and open ways about race and provides various tools to stimulate and inform the conversation. Singleton and Linton remind us that the achievement gap will not be eliminated until we learn to talk about race in ways that build bridges of understanding that lead to effective action."
-Dennis Sparks, Executive Director
National Staff Development Council
Deepen your understanding of racial factors in academic performance and discover new strategies for closing the achievement gap!
Educators are acutely aware of the statistical gaps in achievement between different racial groups. Considering the rapidly changing racial composition of student populations, how can educators reach a level of cultural proficiency necessary to eliminate this disparity?
Examining the achievement gap through the prism of race, this comprehensive text explains the need for candid, courageous conversations about race so that educators may understand why performance inequity persists, and learn how they can develop a curriculum that promotes true academic parity. To help guide policy analysis and instructional reform, the authors present a systemwide plan for transforming schools and districts.
Practical features of this book include:
- Implementation exercises
- Prompts, language, and tools that support profound discussion
- Activities and checklists for administrators
- Action steps for creating an equity team
Only when educators have established both a language and a process for addressing the intersection of race and achievement, will they be able to restructure their schools in ways which improve student performance and fulfill the promise that every child has a right to learn regardless of their race, culture, or class.
See Facilitator's Guide to Courageous Conversations About Race
Customer Reviews:
Truly Needed.......2007-04-03
Singleton has managed to present an incendiary topic in such a way that is palatable and astounding. "Courageous Conversations" creates a great outlet for discussion, and provides great opportunities for educators to actually be the student. It was a pleasure to read.
Courageous Conversations About Race.......2007-03-09
This is an outstanding book that every educator should read. It sheds light on one of the most serious problems in our society and in our schools and provides the impetus for action.
Very Important and much needed.......2006-08-28
WOW! I was fortunate to work with Glenn Singleton as he brought "Courageous Conversations" to my school district. His method of getting all of us to reflect on what we bring to the table is invaluable. When we are able to look at what race means to us and learn to 'listen" to other peoples stories we are able to grow. Get this book, it's life changing and life affirming.
Truly a courageous book!.......2006-03-22
This is truly a courageous book! Richard Hernstein first broke Political Correctness's stranglehold on the discussion of race and educational achievement with his book The Bell Curve, and though that groundbreaking book was meticulously researched, the author suffered a hail of mindless political-inspired assaults. Now, the authors of this book have built on Hernstein's work, calling for meaningful dialogue on what changes need to be made to the American educational establishment to provide meaningful results for non-whites.
If you care about the future of America, then read The Bell Curve and Courageous Conversations about Race!
Book Description
Applied Equity Analysis treats stock valuation as a practical, hands-on tool rather than a vague, theoretical exercise—and covers the entire valuation process from financial statement analysis through the final investment recommendation. Its integrated approach to valuation builds viable connections between a firm’s competitive situation and the ultimate behavior of its common stock. Techniques explained include EVA, newer hybrid valuation techniques, and relative multiple analysis.
Download Description
Applied Equity Analysis treats stock valuation as a practical, hands-on tool rather than a vague, theoretical exercise--and covers the entire valuation process from financial statement analysis through the final investment recommendation.
Customer Reviews:
great book for those in finance.......2006-06-20
This book is great if you're in the field of finance. This is not for the average consumer looking for investment advice. I've been in corporate financial planning and analyis for the past five years and always wondered how equity analysts built their models. This books will give you insight into their thinking and also give enough detail to build your own models. I would have rated it five stars if the book included a CD with his examples in Excel. The author does have website where you can download sample models.
for SELL-SIDE analysts only.......2006-01-14
I bought this book based on the strong reviews as a complement to Damodaran's classic on valuation, but felt disappointed.
To qualify my comments: First, I am not a sell-side analyst, and secondly, I haven't finished the book. After about 50 pages, I threw in the towel.
My first stylistic objection to the book is its low content density. There is tremendous repetition and examples are trotted out in excruciating detail, even where the conclusions are fairly obvious. For example, on p. 34: "At competitive equilibrium, the firm can identify no incremental investment opportunities likely to generate returns in excess of capital costs. Competitive equilibrium is often defined as a condition in which investment opportunities generate returns equal to capital costs, but existing investments continue to earn abnormal rates." To me these two sentences are already redundant. But in case you still didn't get it, further DOWN on the SAME PAGE: "...This situation is called economic equilibrium, or economic parity. What does equilibrium mean? When returns are forced down to capital costs, then economic rents and/or abnormal earnings disappear and no further incentive to enter the business exists".
But the most frequently repeated point of the first two chapters, is best summed up on p. 19: "As I say many times in the coming pages [and he's not kidding, there], equity analysis is not prophecy; it's opinion. It was never meant to be objective description, but it is strong advocacy." If you're the sell-side analyst, having to "dress up a pig" to help your firm gain some banking business, this book might offer some ideas. But where does this leave the consumer of such analysis? "It's the investor's job to 'diversify' by considering a variety of analysts' positions." (p.9)
I think better advice for the investor might be to learn how to perform sound analysis themselves. For that, I recommend Damodaran's book. I lost my faith in this book's intent to provide balanced (let alone predictive) analysis.
One of the Best.......2005-11-01
There are reams and reams of investment valuation books on the market -- that is obvious.
In my opinion, the three no one should be without are Applied Equity Analysis, Stephen Penman's monster tome "financial statements and...", and lastly, Aswath Damadoran's book, "investment valuation."
Most hyperventilating MBAs default to Damadoran; I really enjoy the simplicity behind Applied Equity Analysis.
Caution: Neither of the 3 are what you'd call "light reading."
If you have any money left, honorable mention goes to Cooke's "security analysis on wall street."
Probably the best.......2004-07-15
I've been looking for a practical step by step book on equity analysis from a practitioners viewpoint. This is it. Other books try to take shortcuts. This book does not take short-cuts, but neither is it bogged down with unncessary academic exercises. If you really want to understand how to do valuation and applied equity analysis I can't recommend any book more highly. It is head and shoulders above anything else out there. Penman's book (from Columbia Business School) is also good but it is a VERY serious and weighty book that probably should only be attacked after you have read this one. Get this book by English and you will not be sorry. I have spent way too much time reading hundreds of other books that weren't nearly as educational. Again, however, it is only for the serious investor.
Very readable, very insightful, and extremely practical.......2001-09-23
James English's "Applied Equity Analysis" is a how-to manual on evaluating stocks based on his 20 years of experience at JP Morgan. The book is very well-written and readable since the author employs plain english (no pun intended) to make his three major points: 1) accounting numbers--while by no means perfect--are excellent tools in evaluating stocks, 2) accounting-based stock valuation is superior to (but does not neccessarily supplant) cash flows, and 3) competition ensures that eye-popping financial performance doesn't last forever.
Contrary to another reviewer, English employs excellent examples to clarify and explain his points. Some examples: Gateway 2000's earnings history was used to explain how to find and interpret non-recurring items (NRI) on financial statements. Ratio analysis was demonstrated by looking at the PC industry in 1998. Emerson Electric was the company chosen to show why mature companies were still good buys. Many other examples abound, and English does a successful job in tying their relevance to his arguements.
But successful use of examples is not just the only strength of the book. The author also tackles a range of topics complete with insightful and clear discussions: the flaws of the Efficient Market Hypothesis (EMH), Economic Value Added (EVA), financial statement analysis, fundamental analysis, etc.
A quick glance at the table of contents below gives you an idea of the scope of English's book. I highly recommend this book to not just Wall Street analysts, anyone who is interested in finding fundamental value in evaluating stocks instead of following the crowd.
Pt. 1 Getting Started
Ch. 1 A Day in the Life
Ch. 2 Fundamentals of Equity Valuation
Ch. 3 Strategy and Competition I: The Firm's External Environment
Ch. 4 Strategy and Competition II: The Firm's Internal Competitive Resources
Ch. 5 Fundamentals of Stock Behavior
Pt. 2 The Basic Tools
Ch. 6 Reading a Financial Statement: The Accuracy, Sustainability, and Predictability of Financial Information
Appendix 6-1 Gateway Financial Statements
Ch. 7 Reading a Financial Statement: the Composition of Returns
Appendix 7-1 Comparative Financial Analysis: Personal Computer Industry
Ch. 8 Reading a Financial Statement: Early-Stage Companies and Investment Capacity
Ch. 9 Reading a Financial Statement: Later-Stage Companies and the Transition to Maturity
Ch. 10 Economic Value Added: An Alternative to Traditional Analysis Techniques
Appendix 10-1 Gateway's Cost of Capital
Pt. 3 Financial Models
Ch. 11 Financial Modeling: Base Case Assumptions and Model Design
Appendix 11-1 Dell Computer Corporation Consolidated Statement of Income
Ch. 12 Financial Modeling: The Income Statement and Balance Sheet
Ch. 13 Financial Modeling: The Statement of Cash Flows
Pt. 4 Equity Valuation
Ch. 14 Valuation: Foundations and Fundamentals
Ch. 15 Combat Finance: Relative Methods and Companion Variable Models
Ch. 16 Hybrid Valuation Techniques
Ch. 17 The Quirky Price/Earnings Ratio
Ch. 18 Valuation of Speculative Stocks
Ch. 19 Equity Analysis and Business Combinations
Pt. 5 Getting It Down on Paper
Ch. 20 Financial Writing: Don't Bury the Lead
Bibliography
Index
Book Description
In recent times, venture capital and private equity funds have become household names, but so far little has been written for the investors in such funds, the so-called limited partners. There is far more to the management of a portfolio of venture capital and private equity funds than usually perceived. Beyond the J Curve describes an innovative toolset for such limited partners to design and manage portfolios tailored to the dynamics of this market place, going far beyond the typical and often-simplistic recipe to ‘go for top quartile funds’.
Beyond the J Curve provides the answers to key questions, including:
- Why ‘top-quartile’ promises should be taken with a huge pinch of salt and what it takes to select superior fund managers?
- What do limited partners need to consider when designing and managing portfolios?
- How one can determine the funds’ economic value to help addressing the questions of ‘fair value’ under IAS 39 and ‘risk’ under Basel II or Solvency II?
- Why is monitoring important, and how does a limited partner manage his portfolio?
- How the portfolio’s returns can be improved through proper liquidity management and what to consider when over-committing?
- And, why uncertainty rather than risk is an issue and how a limited partner can address and benefit from the fast changing private equity environment?
Beyond the J Curve takes the practitioner’s view and offers private equity and venture capital professionals a comprehensive guide making high return targets more realistic and sustainable. This book is a must have for all parties involved in this market, as well as academic and students.
Download Description
In recent times, venture capital and private equity funds have become household names, but so far little has been written for the investors in such funds, the so-called limited partners. There is far more to the management of a portfolio of venture capital and private equity funds than usually perceived. Beyond the J Curve describes an innovative toolset for such limited partners to design and manage portfolios tailored to the dynamics of this market place, going far beyond the typical and often-simplistic recipe to go for top quartile funds
Customer Reviews:
A Good Book. .......2006-07-13
I always enjoy reading books on the venture industry written by professionals with practical expereince because the others are usually do not add much insight. However, not all industry experts write insightful books, but this is an exception. However, the price is a bit steep for less than 400 pages.
I would have given this book the highest rating but "The Startup Company Bible for Entrepreneurs" is the best book in my opinion. It is not only for entrepreneurs but VCs and anyone else who wants to gain an in-depth understanding of te venture capital industry and process. It may even be too advanced for some entrepreneurs but if you want to understand and do it right, look no further! Be warned: its 600 pages
These two books would go great together because they are both advanced and very insightful, unlike most of the other books on the subject.
Great Resource.......2006-05-04
Mssrs. Meyer and Mathonet have produced a valuable resource for building and managing a portfolio of venture capital and private equity funds. The book demystifies private equity investing, and presents a quantitative and qualitative approach to the fund selection process. It has been a key resource in the development of our fund, and we reference it often. This book is great for institutional investors, and should be on the shelf of academics as well.
Comprehensive and detailed introduction into the world of PE funds-of-funds.......2005-08-19
This is certainly the best book I found on the modelling and managing of risk for funds-of-funds in private equity. It contains a lot of hints on the currently evolving literature on PE funds-of-funds and describes a complete and integrated approach on how to measure, monitor and manage values and associated risks.
Beyond being the perfect starting point to learn more about this growing market segment, it also provides a lot of input to the practitioner who up to now has not been aware of pragmatic & efficient risk and rating (scoring) models for such funds. While some of the newer papers from academics rather aimed at details or were sometimes exaggeratly sophisticated, this books combines best-practice from theory and practice.
Well done!
Book Description
Guy Fraser-Sampson draws upon twenty years' private equity experience to provide a practical guide to mastering the intricacies of this highly specialist asset class. Aimed equally at investors, professionals and business school students, it starts with such fundamental questions as "what is private equity?" and progresses to detailed analysis of venture and buyout returns. It also unveils a totally new concept which looks set to revolutionise thinking in the industry: Total Return investing.
Often unfairly reviled, and frequently misunderstood, private equity differs from all other asset classes in various important respects, not least in the nature and timing of its returns, which require a whole new approach for those reared on more traditional investments such as bonds and shares. This book shows how a good grasp of the basic structure of private equity vehicles and returns (including the dreaded J-curve) can lead to full understanding of the techniques needed to measure and analyse performance.
Key points include:
- A glossary of private equity terms
- Venture funds and transactions
- Buyout funds and transactions
- Understanding private equity returns
- Analysis of historic returns
- How to plan a fund investment programme
- How to conduct effective due diligence
- Total Return investing
Customer Reviews:
Usefull and well-written.......2007-07-30
I was happy to review the author's first book on investment, having been familiar with his articles for many years, and was looking forward to this one too. I was not disappointed.
Fraser-Sampson is one of the world's leading experts on private equity, and it shows in the sheer quality of this book, page after page. Over twenty years' personal experience are coalesced into a mix of practical hints and technical analysis. Even though it is a subject I thought I knew well, it taught me many things that were completely new to me. I particularly liked the glossary of private equity terms, which explains many arcane phrases in everyday terms but also with welcome touches of humour.
I was surprised to learn that this is the only definitive textbook in the world on this exciting asset class, but a little research on Amazon backs this up. There are casebooks and books on specific aspects of private equity (usually venture capital and/or entrepreneurs raising capital) but nothing which looks at the whole spectrum of the subject from an investor's point of view.
I would imagine this book would be particularly useful to two classes of people. First, business school students and those taking up or seeking entry level positions in buyout or venture capital firms. Second, those looking to raise money for private equity funds, since this book gives a great "view from the other side of the hill" as to what LPs (investors in private equity funds) are looking for.
As with his first book, it is incredibly well written. He really does have a style all of his own. I would recommend it without doubt.
A well-written, comprehensive, and practical overview of the private equity field.......2007-07-18
Guy Fraser-Sampson does an outstanding job in introducing the world of private equity in this book. He starts off defining various concepts in this field, explaining the ways to analyze private equity returns and distinguishing between buyouts and venture capital. He follows with a comprehensive discussion of buyouts (including the various types of buyouts, analysis models, and historical buyout returns) and then an equally thorough investigation of venture capital (with a similar structure to that in the buyouts section). Mr. Fraser-Sampson wraps up with a discussion on due diligence and advice on planning your own investment program in private equity.
I greatly enjoyed the book. It is easy to read, and Mr. Fraser-Sampson presents the concepts in a clear and simple manner - suitable for readers completely new to private equity. I like that the author is unafraid to express his own opinions - whether on the state of transparency in the field, on future buyout returns in Europe, or on usefulness of anti-trust legislation. He furthermore makes sure to separate his thoughts from the pure factual data that he provides to support them.
Interestingly, the book does not simply focus on private equity in one area of the world - the United States. It also covers Europe and sometimes ventures (no pun intended) into other parts of the globe, which I think is a breath of fresh air from the typical finance books that concentrate on US markets only. I am pleased to see this, as I strongly feel that a world-wide outlook is very important in the business world today. And, as Mr. Fraser-Sampson concludes himself, we can learn good lessons by examining the state of the private equity field in various geographic locations: "However, history is cyclical and I now see exactly the same sorts of issues which plagued continental Europe in the past rearing their heads anew in developing private equity areas such as Asia and Latin America. For those in such places who are willing to listen, the European experience has some valuable lessons" (61).
I applaud the author for the amount of historical data present throughout the book - both scattered throughout the text and assembled into tables and diagrams. While most of the data comes from a single source (the VentureXpert system) and the author's own calculations based on that data, it is great to see the general trends in buyout and venture capital returns, fund sizes, etc. I also appreciate that, in a few places, Mr. Fraser-Sampson notes that some of the data may not be very reliable since it is new (which is especially important to the private equity field due to the J-curve phenomenon: fresh data often captures the state of the things on the downward portion of the curve). There is, however, one aspect of history that I would have liked to see represented more. It would have been nice to see several examples of interesting or famous buyouts and venture deals, together with their defining characteristics. While many examples are very briefly touched on, none are really explored in detail. For example, I was pretty surprised that, amidst an extensive description of buyout mechanics, there wasn't any mention of the RJR Nabisco LBO in the late 1980s, to which the author could apply, for instance, his discussion of various levels of debt when dealing with huge transactions.
Some neat small features in this work include concise chapter summaries and a glossary at the end of the book. Little things like that make it easier to reinforce concepts and look them up later. I found the chapter summaries especially helpful - each time I read a chapter summary, I was pleasantly surprised on how concisely and accurately it summed up the important ideas presented earlier. Also useful is the practical advice found in the last two chapters of the book - what a fund or company investor should look for when performing due diligence and how to actually plan your private equity investments program (with an emphasis on the Total Return outlook).
Finally, I'd like to mention something about the author himself. I was confused about one of the diagrams in the book (the one on p. 87, featuring the second scenario in analyzing a buyout return), and I e-mailed Mr. Fraser-Sampson with some questions. He replied almost immediately, clarifying the circumstances around the scenario and thanking me for bringing it to his attention, noting that he will make things more explicit in the next edition (strictly speaking, in the diagram on p. 87, the $20M value under "Yr2" is not a cashflow, since no recapitalization took place - debt was simply reduced without an outflow of equity; this hence technically lowers the shown IRR of 124% to 89%). Not only was Mr. Fraser-Sampson helpful, but he was also just very friendly and approachable. That really tops everything for me... I've e-mailed multiple authors before and have received no responses, yet Mr. Fraser-Sampson responded so quickly. I think it's fantastic when readers can ask an author to clarify concepts and receive insightful answers and comments. It brings the book to an entirely new, higher level.
The only problems I have with this book stem from the fact that I want to see more. Specifically, I would have liked to see the math behind the calculations in some of the numbers that the author presents. I also found myself looking up a lot of extra information outside the book about the IRR - how it is calculated and used. A more in-depth, separate section on IRR would have been great (the author does mention how the money multiple drives the IRR and not vice versa throughout various sections of the book, but a more consolidated discussion would have, in my opinion, been more helpful).
These are very minor cons, and some may argue that they aren't really cons at all, but rather an indication that the author did a splendid job in making me interested in the field of private equity. He wishes to keep his analyses and explanations simple and understandable without burdening the reader with hefty calculations or overly advanced topics. I can certainly respect that. But the absence of this information keeps the reader more at a "birds-eye view" level without allowing him/her to dig deeper into certain concepts. This is just something to keep in mind. In a strict classroom setting for a private equity course, this book would work well as a textbook when complemented by some sort of workbook with detailed analysis models and problems.
In conclusion, this book is an excellent introduction to the world of private equity. I knew very little about this field before reading this work, and I feel that it has given me an excellent well-rounded overview. The book is thorough, yet easy to read and understand. When the only cons I can think of are really just me wanting to learn more, there's not much else I can say about the book other than to highly recommend it to those new to the private equity field.
Pros:
+ clear and comprehensive presentation of the concepts
+ a more complete world-wide view on private equity, compared to most other books
+ lots of historical data on various aspects of buyouts and venture capital
+ great concise summaries at the end of each chapter and a glossary at the end of the book
+ practical advice in due diligence and planning your private equity investment program
+ the author himself is very responsive and helpful
Cons:
- could use more detailed analyses of real-world examples when discussing the structure and characteristics of buyout and venture capital deals
- no math shown for calculating many of the values presented
- lacks an in-depth discussion of advanced topics like the various uses of IRR and how to calculate it
Brilliantly written ! Makes very easy reading out of what are very complex issues........2007-06-29
I have had the advantage of reading the manuscript of this book in advance, and one of the comments on the cover is my own.
Unlike other books on the subject, this one does not dive straight off into complicated areas such as return analysis, nor does it deal with such nebulous matters as the GP/LP relationship (indeed, the writer states that he considers this last topic to be something of a red herring). Instead, the book sets out to be a comprehensive account of private equity from first principles onwards, and will guide you steadily through the intricacies of the asset class until you find yourself quite happily using very complex analysis models to look at buyout and venture returns. More importantly, it focuses on explaining the principles which underlie all of this, so you will actually understand what you are doing, and why. As the writer says repeatedly "don't just look at the figures - try to think what lies behind them."
Fraser-Sampson has twenty years experience of the private equity industry, and the depth and range of his knowledge shines through every page. I was a great fan (and a reviewer) of his first book "Multi Asset Class Investment Strategy", and ideally they should be read together. The first explains why you should be allocating 25% of your portfolio to private equity, and this one explains how you should actually go about it. Just as the first one came up with a whole new way of looking at investment in general, so this one makes some very innovative points, not all of which will make happy reading in some quarters. For example, he believes that private equity performance should be judged across an investor's whole allocation (what he calls Total Return investing) rather than, as presently, on just that small part of it which may be invested at any one time.
Both books are brilliantly written and make very easy reading out of what are very complex issues.
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don't waste your money on this book or its strategy.......2007-10-05
