Case Study: Financial Analysis of Excellere Partners III Fund

This assignment analyzes the Excellere Partners III case study, focusing on the investment opportunity in the private equity market. The analysis evaluates the fund's track record, calculating gross and net returns for Fund I and Fund II, and comparing them to the S&P 500. It addresses key questions about the offering memorandum, including potential risks and investment decisions. The assignment explores the factors influencing investment decisions in Excellere III, considering fund size, carried interest, and diversification opportunities. The study concludes with a recommendation on whether to invest in Excellere III, considering both a $550 million fund with a 25% carry and a $1 billion fund with a 20% carry, and justifying the investment based on the provided financial data.

Running head: FINANCIAL ANALYSIS
Financial Analysis
Name of the Student:
Name of the University:
Authors Note:

1
FINANCIAL ANALYSIS
Contents
Answer 1:.........................................................................................................................................2
Answer 2:.........................................................................................................................................2
Answer 3:.........................................................................................................................................4
Answer 4:.........................................................................................................................................4
References:......................................................................................................................................5

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FINANCIAL ANALYSIS
Answer 1:
Excellere has the investment opportunity to invest in private equity market to increase
return on investment. Since the expected rate of return on private equity is significantly high
hence, the opportunity to invest in private equity certainly makes sense.
Answer 2:
All amounts are in $’ million except return given in percentage (%).
Gross return of two funds
Fund I
Capital commitments in 2007 265
Investment of fund 205
Value of investment in March 2015 552
Gross return 347
Gross Annual return (347 /8) 43.375
Annual return (43.375 x 100/205) 21.16%
(Efni
2017)

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FINANCIAL ANALYSIS
Fund II
Investment amount in 2012 242
Value of investment in 2015 450
Gross total return 208
Gross annual return (208/4) 52
Annual return (52 x 100/242) 21.49%
Yes, the above returns beat the S&P 500 return by significant margin as the annual gross return
in S&P 500 has been 9.12% merely in the period between 2007 and 2015 whereas it is 21.56%
from the Fund I in the same period. Similarly the return on Fund II has also been higher than the
rate of return for the same period. Fund II has earned an annual return of 21.49% compared to
19.06% on S&P 500 during the period from 2011 to 2015 (Johnsen 2015).
Net proceeds from disposition of portfolio investments, distributions of securities in kind and
dividend and interest income shall be allocated to the partners in proportion to their entitlements
in these distributions.
Both the gross return as well as net return of Fund I and Fund II beat the returns from S&P 500
as the returns for the respective periods in Fund I and Fund II were 16.37% and 21.48% were
significantly higher that the returns from S&P 500 of 9.12% and 19.06% respectively for the
identical periods of Fund I and Fund II.

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FINANCIAL ANALYSIS
Answer 3:
All important factors shall be considered before taking a decision on the investment matters.
Thus, in the memorandum the important questions such as standard deviation and risk associated
with investment in different investment opportunities have not been answered.
Answer 4:
Yes, investment shall be made in Excellere III.
The reasons to invest in Excellere III are as following:
I. Excellere III provides a significant rate of return along with diversification of
investment.
II. Opportunity to get commitment of 6 years from partners.
III. A fixed term of 10 years for fund.
IV. Diversification opportunity with maximum quota fixed for investment in domestic
and foreign companies.
V. Distribution of net proceeds to the partners as per the agreement (Jones 2014).
Obviously it vary with the quantum of fund and the carrying rate. It would always be desirable
for an investor to earn highest amount of return. Thus, with 25% carrying interest the investor
would prefer to invest in $550 million fund as compared to 20% carrying interest for $1 billion
provided the investor has the option to make use the balance of $450 million in other profitable
options with carrying rate of 20% or more.

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FINANCIAL ANALYSIS
References:
Efni, Yulia. 2017. "The Mediating Effect Of Investment Decisions And Financing Decisions On
The Effect Of Corporate Risk And Dividend Policy Against Corporate Value". Investment
Management And Financial Innovations 14 (2): 27-37. doi:10.21511/imfi.14(2).2017.03.
Johnsen, Åge. 2015. "Strategic Management Thinking And Practice In The Public Sector: A
Strategic Planning For All Seasons?". Financial Accountability & Management 31 (3): 243-
268. doi:10.1111/faam.12056.
Jones, Robert C. 2014. "Making Better (Investment) Decisions". The Journal Of Portfolio
Management 40 (2): 128-143. doi:10.3905/jpm.2014.40.2.128.