Sad to these these knowledge enhancing videos have so less views! Indeed PE is the game of rare brains!
@SteveBalaban4 жыл бұрын
Thanks for your comment Kunal.
@siiiiiiier3 жыл бұрын
Thank you so much for taking the time to make these instructive videos! Thanks to you, I am currently reading the King of Capital and I got to learn so much about the industry. I am also taking a modelling course and applying for IB analyst positions in the hope to pave my way towards a career in private equity in the future...
@SteveBalaban3 жыл бұрын
Hi Sara, Thank you very much for your comment. How are you liking King of Capital so far? Feel free to share any feedback on it so others can benefit. Also, good luck with your applications for the IB analyst positions!
@JohnSmith-si8nz4 жыл бұрын
Thank you for this video ! What is usually seen as performance in a PE GP-LP contract? Is it the cash-on-cash return multiple above 1x or the IRR above a target amount like (20%)?
@SteveBalaban4 жыл бұрын
Thanks for your message, John. The performance fee is usually calculated as a percentage of IRR?
@JohnSmith-si8nz4 жыл бұрын
@@SteveBalaban thank you very much ! :)
@sarahw76694 жыл бұрын
Are performance fees based on the money, invested into the company by the PE firm and how much more money that generates?
@SteveBalaban4 жыл бұрын
Hi Sarah, thanks for your question. Performance fees are based on Internal Rate of Return (IRR), a time-based metric calculated based on the cash flows of the investment.
@Chrissiemyk4 жыл бұрын
thanks for sharing!! I learn a lot from your vid!
@SteveBalaban4 жыл бұрын
Thanks Chrissiemyk. I appreciate your comment!
@sarahw76694 жыл бұрын
What is the 2% management fee and 20% performance fee based off of? Revenue? Net income? Sales?
@SteveBalaban4 жыл бұрын
Hi Sarah, thanks for your question. Management Fees are typically based off Committed Capital. I created a previous video on Committed Capital here: kzbin.info/www/bejne/pWimqGiYirFrY6c Performance fees are based off of positive performance, usually above a hurdle rate. If the fund's returns do not exceed the hurdle rate, there will not be any performance fees paid. Does that makes sense? If you need any further clarification, please let me know here or you can email me at info@minklearning.com. Thanks again for your question.
@flower.isaaac3 жыл бұрын
is it weird that im not going into the law scene but im still curious bout this?? i know i dont have the intelligence to do law or bother trying because its too late for me at this point but im still curious tho
@johnpinheiro62112 жыл бұрын
Steve update the ranking!!
@burtdow40942 жыл бұрын
are those donations tax-dedcutible? when I think of indigent educational institutions, Yale & Columbia are some of the first that come to mind, after Harvard of course.
@Holmes89 Жыл бұрын
They sure need it. Harvard people don't have anything to eat. Columbia thought of selling drugs like the real Columbia just to make ends meet.
@thesemantisist2 жыл бұрын
Sir, I have a question and I have searched the whole internet for it’s answer but I failed. Does the private equity firm anywhere take or give “Usury”. Now usury is the act of lending money at an interest rate.
@g.starkiller63542 жыл бұрын
Debt? Theres private debt funds for that. They do sometimes take it, but its depending on conditions and relationships. If a bank can supply them the needed amount of capital with better conditions they will likely take that.
@lucatintor48963 жыл бұрын
1:50 do you have an example of its calculation, i am not sure about the application principle. we have 8/2 rapport in both.
@SteveBalaban3 жыл бұрын
Hi Luca, thanks for your message. Let's say look at a few scenarios catch up clause (assuming 8% hurdle rate and 20% performance fee): - fund makes 8% -> all 8% goes to the LP - fund makes 9% -> 8% to the LP & 1% to the GP - fund makes 10% -> 8% to the LP & 2% to the GP - fund makes >10% (anything more than 10%) -> 80% of upside to the LP & 20% of upside to the GP Does that make sense? Extra note: Please note that this is after the management fee has been paid (the management fee gets paid regardless of the performance)
@lucatintor48963 жыл бұрын
@@SteveBalaban So if the fund perform 22% the repartitions it will be 17.6% for the LP and 3.4% for the GP accordingly on the above. do you agree?
@ryanchase55353 жыл бұрын
So if you get a 50% return, 0% to 8% goes to the investor, 8% to 10% is split, then does any additional income go straight to the firm??
@SteveBalaban3 жыл бұрын
Hi Ryan, thanks for writing. To clarify, if you get a 50% return, the first 8% goes to the LP (investor), the next 2% goes to the GP (PE firm), and the remaining 40% is split 32% (80% * 40%) to the LP and 8% (20% * 40%) to the GP. So, in total, the LP would get 40% (8% + 32%) and the GP would get 10% (2% + 8%). Does that make sense? Please let me know if I can clarify further. Thanks!
@Ajaychandra5383 жыл бұрын
@@SteveBalaban please clarify furthermore
@brian19821007 жыл бұрын
Huge Stephen Schwarzman fan here!!
@ThePorschefan6 жыл бұрын
x2
@rishiraj184 жыл бұрын
@steve : After GP'S Meet Hurdle rate , why would 2% go to them . The remaining 92% should be divided into 80:20 , right ?
@SteveBalaban4 жыл бұрын
Hi rishiraj, thanks for your question. What I meant was that the first 8% goes to the LP, then the next 2% goes to the GP, then after that, the LP/GP will split returns 80%/20%. For example, if the investment return was $100M, the first $8M would go to the LP, the next $2M would go to the GP, then the remaining $90M would be split among the LP/GP -> $72M/$18M. So, in total the LP would get $80M ($8M + $72M) and the GP would get $20M ($2M + $18M ). In your comment where "the remaining 92% is divided in 80:20", there is no 'catch-up' clause. Your situation is also possible, but in the video, I was giving an example of a situation with a 'catch-up' clause, which is common in Private Equity. Do you have any further questions on this? Does my comment clarify your question?
@rishiraj184 жыл бұрын
@@SteveBalaban That's interesting. Funds in India and in US, whose PPM I have read had no catch up clause. Something to look out for. I think what would be helpful is if you can add some videos to check performance of PE funds and compare PE companies. Thank you 😊
@illuminated24383 жыл бұрын
There is no "should" in a fund structure. You can do whatever you want so long as it gets done.
@macroezra6 жыл бұрын
Hi sir what about "MERCHANTS OF DEBT" book?
@SteveBalaban4 жыл бұрын
Hi Ben, I haven't read it. Is it good?
@BoneKrusherKate5 жыл бұрын
Could a VC invest into more mature companies or is it by law that they can only invest into smaller start up companies?
@shuhulkaul71465 жыл бұрын
They can, but usually the IRR is much greater for startups (cause of the associated risk). They might consider diversifying, but usually they prefer early stage companies due to high returns.
@SteveBalaban4 жыл бұрын
The VC and investor will agree on the type of the investments that will be made (ie. stage of investment, industry, geography, etc) and the VC will follow this. The is no external law that says a VC can only invest into smaller start up companies. Does that clarify things? Do you have any further questions?
@transcendrealestate24283 жыл бұрын
where can someone learn more about private equity?
@SteveBalaban3 жыл бұрын
Hi I.K., thanks for asking. Due to my love of teaching private equity, and to requests like yours, I will start offering private equity online courses in 2021 direct to people around the world. For more info, please check out my site here: training.minklearning.com/ . Thanks again!
@visionagdao77516 жыл бұрын
Hi sir, Are you famiiar of COT code Fee?
@jzk20204 жыл бұрын
no
@abdallanemr32613 жыл бұрын
You can communicate with you
@kwakukumi47295 жыл бұрын
What if they took less and allowed their share to go back to the employees of the companies they funded?
@SteveBalaban4 жыл бұрын
Thanks for adding this, Kwaku. I think some of the most interesting agreements are the ones between GPs and the portfolio companies (more specifically, the management compensation that results in alignment with PE firms). I guess the question you are raising has to do with the fairness of the agreements (and the compensation). Is that right?