Hvordan skaber kapitalfonde værdi for deres investorer, herunder med fokus på de danske pensionskasser?

Martine Kumana

Student thesis: Master thesis


main purpose of this thesis is to research how the Danish private equity partnerships create values to their investors with a special focus on Danish pension funds. The thesis describes the characteristics and challenges of private equity (PE) as an asset class with focus on buyouts. The decision to invest in PE can be much harder than the decision to invest in other asset classes mainly due to lack of information as regards the performance of PE. Even when the data is available, they may not be accurate due the valuation practices of the PE industry. The research’s departure point is previous international studies on PE partnerships as there are relatively few empirical studies about the Danish market. Both studies and literatures have shown that it is extremely difficult to prepare/work out a valid research about PE partnerships performance simply because the external environment has limited information as PE partnerships. In light of the most recent surveys I find that out, that PE does not fit well into modern asset allocation theories due to the illiquidity and longer time horizon of PE investments, which are not captured in traditional risk/return models. Furthermore, there is a great variation in the performance of top and lower quartile fund managers and top quartile managers are consistently better than their peers, so selecting and getting access to top managers is critical. Based on the analysis made in this thesis, I have found out that Danish pension funds have continued to invest in PE fund mainly due to private equity promised high risk-adjusted returns and partly due to the diversification benefits. In the light of interviews with Danish pension funds, they cited that they know the risks involved with PE, although some of them admitted that they do not have accurate or reliable figures regarding their returns in PE. Since the Danish PE-market is still immature, I wasn’t able to come with a general conclusion whether the Danish PE partnership actually do deliver the promised high return to their investors or not. On the other hand by looking on Axcel as a case study, I find out, that the PE partnership in cooperation with Polaris Private Equity has save some Danish companies from bankruptcy with that did generate value to their investors. Due the current financial crisis, I took a look on the future of PE, and this doesn’t look so bright. It seems like the days of using financial engineering (high leverage and higher exit multiples) to generate returns are gone. With the fact that the global banking industry has been affected by the financial crisis, there are fewer lenders today than there were yesterday. On the other hand PE funds has now a big opportunity to buy companies at a very low price. The PE are/will struggle finding a buyer for their current portfolio companies, which will affect negatively the return to the investors.

EducationsMSc in Finance and Accounting, (Graduate Programme) Final Thesis
Publication date2009
Number of pages145