Wednesday, August 13, 2008

Bear Stearns Private Equity

I bet you thought that Bear Stearns ceased to exist? This fund, though now managed by J.P. Morgan, retains the Bear Stearns name. Like the Lehman fund I discussed yesterday, it is managed by an American investment bank, listed on a European exchange (in this case London) and its price is quoted in dollars (rather than Euros or Pounds). It also currently trades at a discount, though not as large due to a biannual redemption feature. Whereas the Lehman fund is mostly invested in North America, this fund is invested 60% in Europe, 28% in North America, 9% in Asia, and 3% elsewhere. The two funds nicely complement each other geographically. Like the Lehman fund, the fund is mostly invested in buyout funds, though they have a somewhat higher proportion allocated to venture capital. Again, like the Lehman fund they invest both in private equity funds and direct coinvestments. An unusual characteristic is the fund's desire to buy out other funds of funds that trade at a discount.

The Bear Stearns fund now has a three year track record during which it has recorded very good performance, especially since the start of the credit crunch:

It has returned 18% since the start of the subprime crisis, while Lehman has returned 8%. Lehman was only half invested though at the start of the subprime crisis and seems to have picked up the pace more recently.

The fund is leveraged through the issuance of preference shares. Fees include a base management fee of 1.125% to 1.05% p.a. (depending on fund size) and a 7.5% performance fee above the performance hurdle of 8% NAV growth.

BTW, Interactive Brokers got back to me. They are going to look into including these two tickers in the their database. So if you are interested in investing in Private Equity and have an Interactive Brokers account - and if you either want to trade futures, invest internationally, or just pay low brokerage fees, you should - maybe you'll soon be able to invest via these two funds.

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