The objective of this article is to examine the integration among the stock markets of India and its major trading partners with respect to the 2008 global financial crisis. The study is conducted on India and its major trading partners: the United States, China, Germany, Switzerland, Russia, Hong Kong, Saudi Arabia, and the United Arab Emirates. This article uses daily returns covering a period of 18 years, from January 1, 2001 to December 31, 2018 (pre-crisis period from January 1, 2001 to December 31, 2008 and post-crisis period from January 1, 2009 to December 31, 2018). The study uses correlation, unit root test, Granger causality, the Johnsen cointegration test, and generalized method of moments (GMM) to evaluate the integration among the markets. The Granger causality test found short-term integration among the majority of the markets. The Johnsen cointegration test and GMM found long-term integration among the markets. It was interesting to find that after the financial crisis the stock markets became more integrated to an increase in international trade. The factor analysis revealed that before the financial crisis, the NASDAQ was closer to the Bombay Stock Exchange Index (BSE) as compared to the Shanghai Stock Exchange Composite Index (SSE). However, after the financial crisis, the SSE is closer to the BSE as compared to the NADAQ. The reason for such an outcome is the increase in trade with China after the financial crisis. The outcome of this study has implications for the government in framing international trade policy considering the other member countries. Investors can design their investment portfolio for the short run and long run by considering the changing degrees of financial risks of different securities. This article has practical implication for multinational corporations (MNCs) in policy decision making. This article is limited in that it addresses only eight major trading partners of India. TOPICS: Exchanges/markets/clearinghouses, developed markets, emerging markets, frontier markets, global markets Key Findings • Investors can design their investment portfolios by considering the risk-return dynamics with respect to trade and investment. • Investors can avoid certain countries, if there is a trade war between those countries. • MNCs can design their investment and diversification plans looking at the integration and trade across the markets.
{"title":"International Trade and Stock Market Integration: Evidence from Study of India and Its Major Trading Partners","authors":"Ritesh Patel","doi":"10.3905/jpe.2019.1.093","DOIUrl":"https://doi.org/10.3905/jpe.2019.1.093","url":null,"abstract":"The objective of this article is to examine the integration among the stock markets of India and its major trading partners with respect to the 2008 global financial crisis. The study is conducted on India and its major trading partners: the United States, China, Germany, Switzerland, Russia, Hong Kong, Saudi Arabia, and the United Arab Emirates. This article uses daily returns covering a period of 18 years, from January 1, 2001 to December 31, 2018 (pre-crisis period from January 1, 2001 to December 31, 2008 and post-crisis period from January 1, 2009 to December 31, 2018). The study uses correlation, unit root test, Granger causality, the Johnsen cointegration test, and generalized method of moments (GMM) to evaluate the integration among the markets. The Granger causality test found short-term integration among the majority of the markets. The Johnsen cointegration test and GMM found long-term integration among the markets. It was interesting to find that after the financial crisis the stock markets became more integrated to an increase in international trade. The factor analysis revealed that before the financial crisis, the NASDAQ was closer to the Bombay Stock Exchange Index (BSE) as compared to the Shanghai Stock Exchange Composite Index (SSE). However, after the financial crisis, the SSE is closer to the BSE as compared to the NADAQ. The reason for such an outcome is the increase in trade with China after the financial crisis. The outcome of this study has implications for the government in framing international trade policy considering the other member countries. Investors can design their investment portfolio for the short run and long run by considering the changing degrees of financial risks of different securities. This article has practical implication for multinational corporations (MNCs) in policy decision making. This article is limited in that it addresses only eight major trading partners of India. TOPICS: Exchanges/markets/clearinghouses, developed markets, emerging markets, frontier markets, global markets Key Findings • Investors can design their investment portfolios by considering the risk-return dynamics with respect to trade and investment. • Investors can avoid certain countries, if there is a trade war between those countries. • MNCs can design their investment and diversification plans looking at the integration and trade across the markets.","PeriodicalId":43579,"journal":{"name":"Journal of Private Equity","volume":"23 1","pages":"109 - 90"},"PeriodicalIF":0.0,"publicationDate":"2019-11-29","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"46161741","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
The chemical distribution market size was worth about €210.00 billion in 2015 and is expected to reach €440.00 billion by the year 2030. The specialty chemical distribution market itself had a global market size of about €97.00 billion, of which the Asia-Pacific market contributes about €40 billion (sales in 2017). Asia Pacific has the largest specialty chemical market, and it is the fastest growing, with a compound annual growth rate (CAGR) of 6.8% from 2012 to 2017. North America and Western Europe had a smaller specialty chemical distributor market size and significantly smaller growth rate than the Asia-Pacific market. Chemical consumption in North America and the Western Europe regions is decreasing because of weaker demand from the mature Western economies. The bright spot is that the increased growth of the chemical distribution business through to 2022 will originate from the Asia-Pacific region. Mergers and acquisitions (M&A) activities will pick up tremendously in the Asia-Pacific region as global companies search for fast growth in their business and will opt for M&A to grow inorganically. TOPICS: Developed markets, emerging markets, frontier markets Key Findings • Who are the major chemical distributors operating in the Asia-Pacific region, especially in the Association of Southeast Asian Nations (ASEAN)? • Who are the possible potential targets for M&A for the global chemical distributors in the ASEAN? • Are there any other strategies for the global chemical distributors to grow in the ASEAN without doing any acquisition?
{"title":"The Future Dynamics of the Chemical Distribution Business in the ASEAN with the Anticipated Surge of M&A","authors":"T. Bee","doi":"10.3905/jpe.2019.1.092","DOIUrl":"https://doi.org/10.3905/jpe.2019.1.092","url":null,"abstract":"The chemical distribution market size was worth about €210.00 billion in 2015 and is expected to reach €440.00 billion by the year 2030. The specialty chemical distribution market itself had a global market size of about €97.00 billion, of which the Asia-Pacific market contributes about €40 billion (sales in 2017). Asia Pacific has the largest specialty chemical market, and it is the fastest growing, with a compound annual growth rate (CAGR) of 6.8% from 2012 to 2017. North America and Western Europe had a smaller specialty chemical distributor market size and significantly smaller growth rate than the Asia-Pacific market. Chemical consumption in North America and the Western Europe regions is decreasing because of weaker demand from the mature Western economies. The bright spot is that the increased growth of the chemical distribution business through to 2022 will originate from the Asia-Pacific region. Mergers and acquisitions (M&A) activities will pick up tremendously in the Asia-Pacific region as global companies search for fast growth in their business and will opt for M&A to grow inorganically. TOPICS: Developed markets, emerging markets, frontier markets Key Findings • Who are the major chemical distributors operating in the Asia-Pacific region, especially in the Association of Southeast Asian Nations (ASEAN)? • Who are the possible potential targets for M&A for the global chemical distributors in the ASEAN? • Are there any other strategies for the global chemical distributors to grow in the ASEAN without doing any acquisition?","PeriodicalId":43579,"journal":{"name":"Journal of Private Equity","volume":"23 1","pages":"110 - 123"},"PeriodicalIF":0.0,"publicationDate":"2019-11-29","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"49629484","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
In recent years, interest has grown in structuring private equity acquisitions to take advantage of the tax incentives associated with investments in qualified small business stock (QSBS). Although QSBS can often provide a meaningful tax benefit for private equity investors, deciding whether—and how—to structure a control investment for QSBS can be highly complex. This article considers the benefits of QSBS relative to investments in certain flow-through entities and explores several legal ambiguities and anomalies that lead to both planning opportunities and traps for the unwary in structuring platform investments and add-on acquisitions in a manner that optimizes QSBS. TOPICS: Private equity, legal/regulatory/public policy Key Findings • A description of the pre- and posttax IRR implications of an investment in QSBS. • A discussion of the impact of management rollover on QSBS. • Implications of various structures on the ability to maximize QSBS gain exclusion.
{"title":"Private Equity and Qualified Small Business Stock: Tax Implications of Various Holding Company Structures for Control Investments","authors":"M. Spiro","doi":"10.3905/jpe.2019.1.099","DOIUrl":"https://doi.org/10.3905/jpe.2019.1.099","url":null,"abstract":"In recent years, interest has grown in structuring private equity acquisitions to take advantage of the tax incentives associated with investments in qualified small business stock (QSBS). Although QSBS can often provide a meaningful tax benefit for private equity investors, deciding whether—and how—to structure a control investment for QSBS can be highly complex. This article considers the benefits of QSBS relative to investments in certain flow-through entities and explores several legal ambiguities and anomalies that lead to both planning opportunities and traps for the unwary in structuring platform investments and add-on acquisitions in a manner that optimizes QSBS. TOPICS: Private equity, legal/regulatory/public policy Key Findings • A description of the pre- and posttax IRR implications of an investment in QSBS. • A discussion of the impact of management rollover on QSBS. • Implications of various structures on the ability to maximize QSBS gain exclusion.","PeriodicalId":43579,"journal":{"name":"Journal of Private Equity","volume":"23 1","pages":"10 - 29"},"PeriodicalIF":0.0,"publicationDate":"2019-11-29","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"43520054","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This article attempts to study the mechanisms of start-up accelerators and crowdfunding to support entrepreneurial development in Thailand. In particular, the study explores the major accelerator programs to support innovation commercialization and the start-up eco-innovation system. The results show the problems of a weak triple helix system: The interactions among universities, industry and government are not strong enough to drive effective technology commercialization. Arguably, the accelerator program should act as an intermediary among the institutional spheres to provide interactive linkages and promote effective utilization of research results. The empirical study provides insightful implications on the move toward Thailand 4.0 and the lessons Thailand can offer on stimulating entrepreneurial development that can be applied to other developing economies. TOPICS: Emerging markets, private equity, factor-based models Key Findings • The Thai government has established the start-up eco-innovation system so as to transition to a new economic model of Thailand 4.0. • The Thai government has adopted the US model in building the start-up eco-innovation system. • The effective start-up eco-innovation system in Cambridge, USA is mainly fueled by strong Triple Helix interactions.
{"title":"Start-Up Accelerators and Crowdfunding to Drive Innovation Development","authors":"W. Harris, Jarunee Wonglimpiyarat","doi":"10.3905/jpe.2019.1.091","DOIUrl":"https://doi.org/10.3905/jpe.2019.1.091","url":null,"abstract":"This article attempts to study the mechanisms of start-up accelerators and crowdfunding to support entrepreneurial development in Thailand. In particular, the study explores the major accelerator programs to support innovation commercialization and the start-up eco-innovation system. The results show the problems of a weak triple helix system: The interactions among universities, industry and government are not strong enough to drive effective technology commercialization. Arguably, the accelerator program should act as an intermediary among the institutional spheres to provide interactive linkages and promote effective utilization of research results. The empirical study provides insightful implications on the move toward Thailand 4.0 and the lessons Thailand can offer on stimulating entrepreneurial development that can be applied to other developing economies. TOPICS: Emerging markets, private equity, factor-based models Key Findings • The Thai government has established the start-up eco-innovation system so as to transition to a new economic model of Thailand 4.0. • The Thai government has adopted the US model in building the start-up eco-innovation system. • The effective start-up eco-innovation system in Cambridge, USA is mainly fueled by strong Triple Helix interactions.","PeriodicalId":43579,"journal":{"name":"Journal of Private Equity","volume":"23 1","pages":"124 - 136"},"PeriodicalIF":0.0,"publicationDate":"2019-11-29","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"45016682","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
The study described in this article seeks to solve the problem of investment decisions in the current environment, where investor irrationality comes to the front and blinds traditional classical analytical tools. During the post-crisis period, it becomes a problem not only for Russian valuation analysts but globally as well. The present study uses a behavioral finance methodology to solve this problem. To illustrate the solution, we used the discounted cash flow valuation techniques on a huge amount of on-sale Russian businesses and then applied quantitative financial solution methods to process multiple results. TOPICS: Private equity, factor-based models, developed markets Key Findings • The article provides strict, consistent and interconnected analytical instruments to measure how sentiments have an influence on prices and lead to different interpretations of risks and returns in behavioral finance theories. • The methodology described in the article shows how sentiment is ref lected in the stochastic discount factor. • The article illustrates particular M&A market methods for implementation of the stochastic discount factor-based behavioral pricing theory.
{"title":"New Horizons of Behavioral Valuation","authors":"S. Bogatyrev","doi":"10.3905/jpe.2019.1.094","DOIUrl":"https://doi.org/10.3905/jpe.2019.1.094","url":null,"abstract":"The study described in this article seeks to solve the problem of investment decisions in the current environment, where investor irrationality comes to the front and blinds traditional classical analytical tools. During the post-crisis period, it becomes a problem not only for Russian valuation analysts but globally as well. The present study uses a behavioral finance methodology to solve this problem. To illustrate the solution, we used the discounted cash flow valuation techniques on a huge amount of on-sale Russian businesses and then applied quantitative financial solution methods to process multiple results. TOPICS: Private equity, factor-based models, developed markets Key Findings • The article provides strict, consistent and interconnected analytical instruments to measure how sentiments have an influence on prices and lead to different interpretations of risks and returns in behavioral finance theories. • The methodology described in the article shows how sentiment is ref lected in the stochastic discount factor. • The article illustrates particular M&A market methods for implementation of the stochastic discount factor-based behavioral pricing theory.","PeriodicalId":43579,"journal":{"name":"Journal of Private Equity","volume":"23 1","pages":"55 - 62"},"PeriodicalIF":0.0,"publicationDate":"2019-11-29","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"41682519","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Often compared to real estate for its inner characteristics, infrastructure (e.g., railways, bridges, ports) is an alternative asset deeply involved in the growth and development of the countries where it is implemented; infrastructure is also intertwined with the political and economic environments of these countries. Developing and developed countries face different problems in terms of infrastructure investments. European countries are improving quality of life with better transportation networks, access to renewable energy, and social infrastructures. Countries try to achieve economic growth through the improvement of economic infrastructure. In developing countries, it is social infrastructure (e.g., hospitals, schools, desalination plants, waste and water treatment plants) that dominates the field, with the goal of achieving a higher level of economic and social development. Infrastructure investments have specific features that differentiate them from traditional assets, among them low volatility of cash flows, indexation to inflation, predictable and steady stream of cash flows, large capital outlays at the start, and nearly nonexistent capital cash outs thereafter. Investment in infrastructure was previously considered to be low risk and low return, although this depends on the sector chosen for investment. This article aims to compare a diversified portfolio, namely the Yale endowment fund investment portfolio, with a portfolio fully invested in infrastructure investments to determine which is the most efficient. The Excel tool solver was used to obtain optimal portfolios. The author maximizes the Roy’s safety-first ratio: a risk-adjusted return performance metric measuring the risk that the portfolio value will fall below a minimum acceptable level over a time period. The author considers various levels of risk aversion as minimum return requirements. The diversified portfolio appears to be the most efficient for all types of investors. However, during a financial crisis, the portfolio made up of infrastructure investments is the least affected and the most efficient. The analysis demonstrates that infrastructure investments are less affected by specific economic situations than are other types of assets, although a diversified portfolio is more efficient in normal times. TOPICS: Other real assets, private equity, real assets/alternative investments/private equity, frontier markets Key Findings • Infrastructure deals differ from traditional assets; they are long term investments providing stable cash flows with a low volatility. • This article measures the risk-adjusted return of a portfolio using the Roy’s safety-first ratio allowing us to determine the best allocation of capital to maximize it. • Infrastructure investments do diversify portfolios by reducing it is volatility to external events, such as a financial crisis.
{"title":"Infrastructure Investment as a True Portfolio Diversifier","authors":"C. Duclos","doi":"10.3905/jpe.2019.1.096","DOIUrl":"https://doi.org/10.3905/jpe.2019.1.096","url":null,"abstract":"Often compared to real estate for its inner characteristics, infrastructure (e.g., railways, bridges, ports) is an alternative asset deeply involved in the growth and development of the countries where it is implemented; infrastructure is also intertwined with the political and economic environments of these countries. Developing and developed countries face different problems in terms of infrastructure investments. European countries are improving quality of life with better transportation networks, access to renewable energy, and social infrastructures. Countries try to achieve economic growth through the improvement of economic infrastructure. In developing countries, it is social infrastructure (e.g., hospitals, schools, desalination plants, waste and water treatment plants) that dominates the field, with the goal of achieving a higher level of economic and social development. Infrastructure investments have specific features that differentiate them from traditional assets, among them low volatility of cash flows, indexation to inflation, predictable and steady stream of cash flows, large capital outlays at the start, and nearly nonexistent capital cash outs thereafter. Investment in infrastructure was previously considered to be low risk and low return, although this depends on the sector chosen for investment. This article aims to compare a diversified portfolio, namely the Yale endowment fund investment portfolio, with a portfolio fully invested in infrastructure investments to determine which is the most efficient. The Excel tool solver was used to obtain optimal portfolios. The author maximizes the Roy’s safety-first ratio: a risk-adjusted return performance metric measuring the risk that the portfolio value will fall below a minimum acceptable level over a time period. The author considers various levels of risk aversion as minimum return requirements. The diversified portfolio appears to be the most efficient for all types of investors. However, during a financial crisis, the portfolio made up of infrastructure investments is the least affected and the most efficient. The analysis demonstrates that infrastructure investments are less affected by specific economic situations than are other types of assets, although a diversified portfolio is more efficient in normal times. TOPICS: Other real assets, private equity, real assets/alternative investments/private equity, frontier markets Key Findings • Infrastructure deals differ from traditional assets; they are long term investments providing stable cash flows with a low volatility. • This article measures the risk-adjusted return of a portfolio using the Roy’s safety-first ratio allowing us to determine the best allocation of capital to maximize it. • Infrastructure investments do diversify portfolios by reducing it is volatility to external events, such as a financial crisis.","PeriodicalId":43579,"journal":{"name":"Journal of Private Equity","volume":"23 1","pages":"30 - 38"},"PeriodicalIF":0.0,"publicationDate":"2019-11-29","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"43139897","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
The main goal of this article is to establish a dynamic profile of poverty and to evaluate the impact of economic growth on poverty and income inequality. The economic literature inspired by the previous theoretical works of Alesina and Perotti (1993), Ravallion (2004), Stiglitz (2013), and Ferreira (2016) shows that there is an inverse correlation between the income inequality approached by the Gini index and the economic growth measured by the gross domestic product (GDP), but the facts prove that this is not always the case. The objective of this article is to establish whether there is econometric evidence of such relationships. For this purpose, the authors used econometric methods to take into account the heterogeneity of the panel data used (lower-middle-income countries in the period covering 1970–2018). Using a fixed-effect approach and consistent with expectations, the authors argue that an increase in income inequality decreases GDP per capita in the selected sample. The authors found, after controlling for heterogeneity, an overall one-percentage-point rise in the poverty gap and that the Gini index decreased GDP per capita by around 3.8% and 6.8%, respectively. Accordingly, the path to sustainable economic growth in the future passes through a reduction of inequalities, especially income inequalities, by instituting public actions and policies for the poorest people. TOPIC: Financial crises and financial market history Key Findings • Using a fixed-effect approach the authors argue that an increase in income inequality decreases GDP per capita in the selected sample. The authors found, after controlling for heterogeneity, an overall one percentage-point rise in the poverty gap and that the Gini index decreased GDP per capita by around 3.8% and 6.8%, respectively. • Accordingly, the path to sustainable economic growth in the future passes through a reduction of inequalities, especially income inequalities, by instituting public actions and policies for the poorest people. • They affirm that economic growth is not enough to eradicate poverty. Although it is a necessary and insufficient condition, it must be combined with the implementation of targeted actions and policies to reduce present and future inequalities.
{"title":"Economic Growth, Poverty, and Income Inequality: Implications for Lower- and Middle-Income Countries in the Era of Globalization","authors":"Houda Lechheb, H. Ouakil, Youness Jouilil","doi":"10.3905/jpe.2019.1.097","DOIUrl":"https://doi.org/10.3905/jpe.2019.1.097","url":null,"abstract":"The main goal of this article is to establish a dynamic profile of poverty and to evaluate the impact of economic growth on poverty and income inequality. The economic literature inspired by the previous theoretical works of Alesina and Perotti (1993), Ravallion (2004), Stiglitz (2013), and Ferreira (2016) shows that there is an inverse correlation between the income inequality approached by the Gini index and the economic growth measured by the gross domestic product (GDP), but the facts prove that this is not always the case. The objective of this article is to establish whether there is econometric evidence of such relationships. For this purpose, the authors used econometric methods to take into account the heterogeneity of the panel data used (lower-middle-income countries in the period covering 1970–2018). Using a fixed-effect approach and consistent with expectations, the authors argue that an increase in income inequality decreases GDP per capita in the selected sample. The authors found, after controlling for heterogeneity, an overall one-percentage-point rise in the poverty gap and that the Gini index decreased GDP per capita by around 3.8% and 6.8%, respectively. Accordingly, the path to sustainable economic growth in the future passes through a reduction of inequalities, especially income inequalities, by instituting public actions and policies for the poorest people. TOPIC: Financial crises and financial market history Key Findings • Using a fixed-effect approach the authors argue that an increase in income inequality decreases GDP per capita in the selected sample. The authors found, after controlling for heterogeneity, an overall one percentage-point rise in the poverty gap and that the Gini index decreased GDP per capita by around 3.8% and 6.8%, respectively. • Accordingly, the path to sustainable economic growth in the future passes through a reduction of inequalities, especially income inequalities, by instituting public actions and policies for the poorest people. • They affirm that economic growth is not enough to eradicate poverty. Although it is a necessary and insufficient condition, it must be combined with the implementation of targeted actions and policies to reduce present and future inequalities.","PeriodicalId":43579,"journal":{"name":"Journal of Private Equity","volume":"23 1","pages":"137 - 145"},"PeriodicalIF":0.0,"publicationDate":"2019-11-29","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"42527249","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
It is difficult to find an overview of the Indian venture capital industry because no systematic attempt has been made. To fill this critical gap, the author wants to offer an overall understanding of the Indian venture capital industry. The definition of venture capital is tricky, and the author proposes to use the term to refer only to start-up, early stage, and growth venture capital–stage funding. The term thus encompasses only traditional venture capital. To create an overall understanding or overview of Indian venture capital, the author will cover the following: • How has the venture capital industry in India developed in recent years and how will it continue to develop in the future? Which factors influence its development? • How does it compare to other private market investment asset classes in India and other developed venture markets such as the United States and Europe? • How are Indian venture funds structured in terms of organization? What are the sources for the funds invested in Indian venture capital? • What are the investment patterns of venture capital investment, in terms of, for example, venture stage, industry sectors, investment size, deal trends, and geography? • What exit mechanisms are used? Which exit mechanism has been more favorable and why? • What levels of return are achieved? TOPICS: Security analysis and valuation, statistical methods, emerging markets, risk management, private equity Key Findings • The Indian Venture Capital ecosystem has matured over the last 15 years, it is still a relatively young VC ecosystem as compared to developed markets like US & Europe, with around 4% share of global venture capital investments. This growth is noticeable and is in stark contrast to 2004, when venture investments were almost negligible in India. • While India received around 2.6% of global private-market investments from 2009–2017 period, private equity comprising of growth, buyout, turnaround & mezzanine funding have attracted majority (48%) of these investments. Share of venture capital was 16% of the overall private-market investments during this period. • Share of Series A Investments in value terms has fallen to 13% in 2016–2019 period from 40% in 2005–2010 period, with Series B & above gaining ground during these years. This reflects that VC ecosystem is maturing and promising start-ups are being funded throughout their growth journey. • Mergers & acquisitions (47%) followed by secondary sales (29%) have been the most preferred exit routes in terms of number of exits as of 2018. The ecosystem needs to create large no. of IPO exits across the value spectrum to build a more sustainable exit scenario. Further, unlike US, India doesn’t have a robust data repository on returns and other benchmarks of venture funds. Industry associations and regulatory bodies need to evolve more scientific ways to track returns data to create an accurate picture of the ecosystem.
{"title":"Overview of Venture Capital Landscape in India","authors":"Mohammad Mustafa","doi":"10.3905/jpe.2019.1.098","DOIUrl":"https://doi.org/10.3905/jpe.2019.1.098","url":null,"abstract":"It is difficult to find an overview of the Indian venture capital industry because no systematic attempt has been made. To fill this critical gap, the author wants to offer an overall understanding of the Indian venture capital industry. The definition of venture capital is tricky, and the author proposes to use the term to refer only to start-up, early stage, and growth venture capital–stage funding. The term thus encompasses only traditional venture capital. To create an overall understanding or overview of Indian venture capital, the author will cover the following: • How has the venture capital industry in India developed in recent years and how will it continue to develop in the future? Which factors influence its development? • How does it compare to other private market investment asset classes in India and other developed venture markets such as the United States and Europe? • How are Indian venture funds structured in terms of organization? What are the sources for the funds invested in Indian venture capital? • What are the investment patterns of venture capital investment, in terms of, for example, venture stage, industry sectors, investment size, deal trends, and geography? • What exit mechanisms are used? Which exit mechanism has been more favorable and why? • What levels of return are achieved? TOPICS: Security analysis and valuation, statistical methods, emerging markets, risk management, private equity Key Findings • The Indian Venture Capital ecosystem has matured over the last 15 years, it is still a relatively young VC ecosystem as compared to developed markets like US & Europe, with around 4% share of global venture capital investments. This growth is noticeable and is in stark contrast to 2004, when venture investments were almost negligible in India. • While India received around 2.6% of global private-market investments from 2009–2017 period, private equity comprising of growth, buyout, turnaround & mezzanine funding have attracted majority (48%) of these investments. Share of venture capital was 16% of the overall private-market investments during this period. • Share of Series A Investments in value terms has fallen to 13% in 2016–2019 period from 40% in 2005–2010 period, with Series B & above gaining ground during these years. This reflects that VC ecosystem is maturing and promising start-ups are being funded throughout their growth journey. • Mergers & acquisitions (47%) followed by secondary sales (29%) have been the most preferred exit routes in terms of number of exits as of 2018. The ecosystem needs to create large no. of IPO exits across the value spectrum to build a more sustainable exit scenario. Further, unlike US, India doesn’t have a robust data repository on returns and other benchmarks of venture funds. Industry associations and regulatory bodies need to evolve more scientific ways to track returns data to create an accurate picture of the ecosystem.","PeriodicalId":43579,"journal":{"name":"Journal of Private Equity","volume":"23 1","pages":"63 - 89"},"PeriodicalIF":0.0,"publicationDate":"2019-11-29","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"48029526","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
The author takes a closer look at the life and legacy of Michael Milken. He discusses why Michael Milken, also known as the Junk Bond King, was not just any other king or run-of-the-mill junk dealer, but, in fact, “The Junk Dealer.” The author finds parallels between the three parts to any magic act and what Michael Milken did, showing that his accomplishments were nothing short of a miracle. Milken’s compensation at that time captures, to a certain extent, the magnitude of the changes he brought about, the ecosystem he created for businesses to flourish, and the impact he had on the wider economy and on the future growth and development of US industry. The author emphasizes two of Milken’s contributions to the financial industry that have grown in importance over the years. One was the impetus given to the private equity industry and the use of leveraged buyouts. The second was the realization that thorough research was the key to success, financial and otherwise. Perhaps an unintended consequence of the growth in junk bonds and tailored financing was the growth of Silicon Valley and technology powerhouses in the San Francisco Bay Area. Investors witnessed that there was a possibility for significant returns and that financial success could be had due to the risk mitigation that Milken demonstrated by investing in portfolios of so-called high-risk and low-profile companies. The author points out the current trend in many regions of the world—the birth of financial and technology firms—and suggests that finding innovative ways of financing could be the key to the sustained growth of these ecosystems. TOPICS: Private equity, exchanges/markets/clearinghouses, information providers/credit ratings, financial crises and financial market history Key Findings • A closer look at the life and legacy of Michael Milken, discovering parallels between what he accomplished and the three parts to any magic act. • Discussion of Milken’s contributions to the financial industry: the impetus given to the private equity industry and the realization that thorough research was the key to success. • Suggestion that innovative and tailored financing, demonstrated by Milken’s investment strategy, could be the key to the sustained growth of ecosystems such as the Silicon Valley.
作者仔细研究了迈克尔·米尔肯的生平和遗产。他讨论了为什么被称为“垃圾债券之王”的迈克尔·米尔肯(Michael Milken)不只是普通的债券大王或普通的垃圾交易商，而实际上是“垃圾交易商”。作者发现，这三个部分与任何魔术表演都有相似之处，表明迈克尔·米尔肯的成就简直就是一个奇迹。在某种程度上，米尔肯当时的薪酬反映了他带来的巨大变化，他为企业繁荣创造的生态系统，以及他对更广泛的经济和美国工业未来增长和发展的影响。作者强调了米尔肯对金融业的两项贡献，这两项贡献近年来越来越重要。其中之一是对私人股本行业和杠杆收购使用的推动。第二是认识到彻底的研究是成功的关键，无论是经济上还是其他方面。垃圾债券和量身定制融资增长的一个意想不到的后果，或许是硅谷和旧金山湾区(San Francisco Bay Area)科技巨头的增长。投资者看到，米尔肯通过投资于所谓的高风险和低调公司的投资组合，证明了降低风险的可能性，从而有可能获得可观的回报，并取得财务上的成功。作者指出了目前世界上许多地区的趋势——金融和科技公司的诞生——并建议寻找创新的融资方式可能是这些生态系统持续增长的关键。主题:私募股权，交易所/市场/清算所，信息提供商/信用评级，金融危机和金融市场历史。主要发现•仔细研究迈克尔·米尔肯的生活和遗产，发现他所取得的成就与任何魔术的三个部分之间的相似之处。•讨论米尔肯对金融行业的贡献:对私募股权行业的推动以及对深入研究是成功关键的认识。•米尔肯的投资策略表明，创新和量身定制的融资可能是硅谷等生态系统持续增长的关键。
{"title":"Michael Milken: The Junk Dealer","authors":"R. Kashyap","doi":"10.3905/jpe.2019.1.095","DOIUrl":"https://doi.org/10.3905/jpe.2019.1.095","url":null,"abstract":"The author takes a closer look at the life and legacy of Michael Milken. He discusses why Michael Milken, also known as the Junk Bond King, was not just any other king or run-of-the-mill junk dealer, but, in fact, “The Junk Dealer.” The author finds parallels between the three parts to any magic act and what Michael Milken did, showing that his accomplishments were nothing short of a miracle. Milken’s compensation at that time captures, to a certain extent, the magnitude of the changes he brought about, the ecosystem he created for businesses to flourish, and the impact he had on the wider economy and on the future growth and development of US industry. The author emphasizes two of Milken’s contributions to the financial industry that have grown in importance over the years. One was the impetus given to the private equity industry and the use of leveraged buyouts. The second was the realization that thorough research was the key to success, financial and otherwise. Perhaps an unintended consequence of the growth in junk bonds and tailored financing was the growth of Silicon Valley and technology powerhouses in the San Francisco Bay Area. Investors witnessed that there was a possibility for significant returns and that financial success could be had due to the risk mitigation that Milken demonstrated by investing in portfolios of so-called high-risk and low-profile companies. The author points out the current trend in many regions of the world—the birth of financial and technology firms—and suggests that finding innovative ways of financing could be the key to the sustained growth of these ecosystems. TOPICS: Private equity, exchanges/markets/clearinghouses, information providers/credit ratings, financial crises and financial market history Key Findings • A closer look at the life and legacy of Michael Milken, discovering parallels between what he accomplished and the three parts to any magic act. • Discussion of Milken’s contributions to the financial industry: the impetus given to the private equity industry and the realization that thorough research was the key to success. • Suggestion that innovative and tailored financing, demonstrated by Milken’s investment strategy, could be the key to the sustained growth of ecosystems such as the Silicon Valley.","PeriodicalId":43579,"journal":{"name":"Journal of Private Equity","volume":"23 1","pages":"39 - 54"},"PeriodicalIF":0.0,"publicationDate":"2019-10-10","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"43770909","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2019-08-30DOI: 10.3905/jpe.2019.22.4.019
J. Milam
Investing in creative or entrepreneurial ventures is part of the human condition and goes back as far as recorded history. The patronage of the Medici family of Florence supported the work of Leonardo de Vinci, Michelangelo, and Galileo. Queen Isabella was essentially a venture capitalist, supporting Christopher Columbus in his exploration of the New World. Many of the critical inflection points in modern history that had dramatic impacts on the human condition resulted from entrepreneurial initiatives supported by wealthy individuals and families. The history of modern venture capital was catalyzed by efforts at mobilizing capital for the many companies emerging after World War II, in part from both necessity and opportunity—the need to support the GIs returning from the war and the opportunity to commercialize the new technologies that resulted from the war effort. Commercial access and use of the Internet represents the latest catalyst for the acceleration in entrepreneurial activity around the world, with a corresponding growth in individuals investing in new ventures, as well as new funds. Unfortunately, the process of underwriting an entrepreneurial venture remains much like it was in the time of Leonardo de Vinci and Columbus: Energetic entrepreneurs convince a supporter (investor) of their vision and seek to share the rewards with the supporter, should there be any rewards to share. Investing was, and largely continues to be, transacted on a case-by-case basis. Ironically, there has been little innovation in the very funding mechanism of entrepreneurial finance. This has led to a critical shortage of early stage risk capital in various regions around the United States where historically blue-collar jobs have been disintermediated by technological advancements, but capital has not been available in these communities to support the new (digital) jobs that would replace those old jobs and provide hope for the next generation residing in those communities. This article will review the history of venture capital, explore the ineffectiveness of the historical model, and explore some of the innovative initiatives to improve the effectiveness of venture capital, thus funding more startups more efficiently and in more communities while delivering better risk-adjusted returns for investors. TOPIC: Private equity
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