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The Roundup

The Roundup  Summary of Member Briefing, January 2014, London

OPPORTUNITIES AND CONCERNS IN DIRECT INVESTMENT DEAL FLOW

Speaker: 

Mr GAGIK APKARIAN, Tetrad Capital Partners

Direct investing in private equity has developed significant momentum, both at family offices and at institutions - driven by:

- The need for control in implementing an investment theme and the consequent focus on specific industries, geographies, stage of growth, etc.
- The ability to construct a more thoughtful portfolio of holdings in alternative assets, one that is more balanced and consistent with objectives in terms of risk, liquidity, etc
- The need to address concerns about the motivation of intermediaries and alignment of incentives
- The desire to transfer knowledge from the intermediary to the investor in terms of identifying what constitutes good and bad investments

There are a number of attributes necessary for successful direct investing:

- Deal flow: FIOs can often generate reasonable deal flow from referrals from intermediaries and other families but there is likely to be a wide dispersion in terms of quality and most offices do not have the resources to appropriately diligence these opportunities
- Returns: It is imperative to develop an understanding on the real sources of expected value generation in an investment - Value purchased, Value Created, Value Extracted – to ascertain the real risk and return potential
- Control: Matching the appropriate level of control of the FIO in terms of entry, investment management and exit, with the office’s expertise
- Transparency: Ensuing there is access to the right information at the right time at the right level of detail, as well as access to the company and management

Pursuing direct investments successfully requires systematic focus on several key issues including:

- Developing a clear investment strategy
- Building an effective team
- Developing a broad network
- Designing and implementing effective internal processes
- Cultivating the right environment for risk taking and learning

About the Speaker: Gagik Apkarian

Gagik Apkarian is the founder and managing director at Tetrad Capital Partners - a corporate & stakeholder advisory and principal investment firm. He has over 20 years of experience in private equity, management consulting & investment banking in the U.S, Europe & Australia.

Prior to Tetrad Capital, Mr. Apkarian was the co-founder and a general partner at Vulcan Capital – the investment office of Paul G Allen (co-founder of Microsoft). His team had the dual role of restructuring a diverse $10Bn+ portfolio of public and private equity holdings, and of pursuing a diverse range of investments in private equity, public securities and infrastructure. In his role he had responsibility for companies ranging in value from less than $100 million to over $20 billion. He was a member of or an observer on the boards of directors of these companies and a member of Vulcan’s Investment Committee.

Prior to Vulcan Capital, he was an investment banker in New York and London with Bear Stearns and Morgan Stanley and also worked for several years at McKinsey & Company in New York and Australia. He is also a judge on Harvard University’s Innovation Challenge