MGMT FE 247 VC&PE 2024 - Super Saturday Quiz Show #1

“Private Equity Investment Practices: A Comprehensive Study,” (2014)
Rajibul Hasan, The Journal of Private Equity
What does the term 'dry powder' mean in the context of PE?

• Funds allocated to cover management fees

• Cash available for investment

• Proceeds from the liquidation of investments

• A secret formula for making instant noodles

“Private Equity Investment Practices: A Comprehensive Study,” (2014)
Rajibul Hasan, The Journal of Private Equity

Which of the following is NOT a

• Buyouts (i.e. LBO)

• Venture Capital

• Distressed Investing

• Merger Arbitrage

“Venture Capital – Patronage to Apprenticeship to Profession” (2019) Joe
Milam, The Journal of Private Equity

In what ways does the American waterfall method of profit calculation
introduce “perverse incentives” according to the author?

• It may not ensure investors get their capital returned, focusing on individual investment performance.

• It calculates the hurdle rate at the fund level, favoring investors.

• It reduces the carried interest for managers, favoring investors.

• It puts all of the investment weight on the most promising company in the fund.

“Venture Capital – Patronage to Apprenticeship to Profession” (2019) Joe
Milam, The Journal of Private Equity

What role does location play in venture capital investments as discussed in the article?

• Investments are usually made internationally to spread risk.

• Most venture capitalists invest close to home due to logistics and relationship factors.

• The location of a startup does not affect its chances of receiving venture capital.

• Only startups in Silicon Valley receive venture capital investments.

“Venture Capital – Patronage to Apprenticeship to Profession” (2019) Joe
Milam, The Journal of Private Equity

According to the article, what structural change could improve the venture
capital model?

• Increasing the size of venture capital funds.

• Limiting the geographic focus of investments.

• Focusing solely on technology startups.

• Diversifying portfolios to manage risk better.

“Perspectives on Private Equity and Venture Capital” (2022) Mark
Anson, The Journal of Portfolio Management

What is a primary characteristic that differentiates private equity and
venture capital from public-equity markets, as documented by the author?

• They offer less risk compared to public-equity markets.

• They are considered to be more liquid than public-equity markets.

• They require less managerial expertise to achieve superior performance.

• They are as much access classes as asset classes.

“Perspectives on Private Equity and Venture Capital” (2022) Mark
Anson, The Journal of Portfolio Management

What is the impact of incorporating lagged betas into the analysis of private equity and venture capital investments, as demonstrated in Exhibits 2 and 3 of the article?

• It reduces the overall systematic market risk associated with these investments.

• It does a better job capturing systematic market risk and the R2 measure, indicating a stronger relationship with public equity market movements.

• It reveals that private equity and venture capital investments have no correlation with the public equity markets.

• It eliminates the need for a liquidity premium in evaluating these investments.

“Perspectives on Private Equity and Venture Capital” (2022) Mark
Anson, The Journal of Portfolio Management

How does the article describe the performance trend of private equity based on fund size?

• Large funds perform better due to their ability to access more deals.

• Smaller, sector-focused funds tend to outperform larger funds.

• Performance is not related to the size of the fund.

• All fund sizes perform equally across different market conditions.

“New Insights into Private Equity: Empirical Evidence from More Than
500 Buyouts,” (2022) Andreas Gruener and Leon Marburger, The Journal of
Portfolio Management

According to the article, how did private equity performance compare to public equities during the financial crises?

• PE underperformed due to higher volatility.

• PE outperformed as it was less affected by market swings.

• PE performance matched the public equities.

• There is no comparative data available.

“New Insights into Private Equity: Empirical Evidence from More Than
500 Buyouts,” (2022) Andreas Gruener and Leon Marburger, The Journal of
Portfolio Management

How did private equity funds' reported returns compare to actual returns, based on the article's findings?

• Reported returns are always lower than actual returns.

• Reported returns tend to be overstated.

• Reported returns accurately reflect actual returns.

• Private equity funds don't report returns.