Fox Venture Partners Harvard Case Solution & Analysis

Question number 1:

            The Fox Venture partners are willing to invest the money into the private equity industry. The partnership is with an opportunity to invest the funds equal to $100 million in private equity and it has to raise the funds from rich families in the USA. The minimum investment is $2 million there fore it may not be possible for every common person of USA to invest such amount in the partnership funds. In USA wealthiest families have played an important role in the success of equity industry, thereforePeter is targeting the rich families for investment purpose in his venture firm.

            FVP will invest in the private companies’ equity and it is estimated that on average it can earn 15% returns for the investors if the equity industry perform according to its estimation. The time period is long as 15 years, thereforethe richest families can have patience and a family can be willing to invest 5%-10% of its net worth in such investment therefore 200 rich families are selected that can invest in their funds.

            FVP is under consideration that a person can invest in such funds for its net worth of 5%-10%, therefore it must divide its funds into two forms in one it must take investment from rich and another for medium rich people that may be willing to invest 10% of their net worth. It can increase the funds amount and $100 target can be reached through incorporating medium rich persons.

Question number 2:

            David Swensen is under consideration that he does not need any intermediary to invest in the private equity. A single person can only invest in one, two or max three private equities because the individual may not have enough funds to invest in many private equity and they are not willing to invest in a single equity company, due to the risky nature of private equity. The private equity is risky due to less reporting requirement over the private companies in the US and all around the world. The individual may not be necessarily related to the finance background therefore these are many limitations that are against the individual investments.

            The intermediaries have an experience in the field, therefore they can better understand the financial results as in this case the firm personnel have an experience above 24 years in investment funds. The portfolio is diversified and the consultants can take part in the management of the private equity due to heavy investment in the equity industry.

            The intermediary charges for their expertise that they provide for the fund portfolio and the fees is accepted by the individual because the security of the money is the first priority and individuals are reluctant to bear losses. It is going to invest in 20 funds with $5 million each.

Question number 3:

            FVP is under consideration that the individual invest will invest an amount of $2 million as committed capital. The first fees they will charge $100,000 on the initial investment and the net amount of $1.9 million will be invested in the private companies in six years.In the first four years they will invest 20% of the committed capital and then remaining 20% in the next 2 years. The firm will charge the fees of according to the capital invested and then it will charge fees from the capital gains and it is assumed that the gain will flow to the firm in 6th year. It is estimated that the funds will total double of the invested amount during the period of 14 years, it will charge $10,000 in 6th year and $15,000 for the remaining years on investment tenure.Fox Venture Partners Case Solution

Question number 4:

            The families are reluctant to invest in FVP because the amount it requires from individual family is $2 million that is a very high amount irrespective of the wealth of the in individuals. The returns are, howeverattractive, but the tenure is very large for the principal repayment and gains. The third issue is that the investors can get money back that is about to start at the end of the sixth years, individuals may not be willing to wait for six years to have money. The returns are highly uncertain because the investment focus of the portfolio is a private company that are more risky than public listed companies. These four are the reasons that why individual families are reluctant to invest in FVP.....................

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