Hi Anonymous,
well, the question is very unconcrete and the case could go into a million directions. But here is a fundamental line of thinking that should be employed:
I would start by making explicit the relationship between return rate and inherent risk of an investment class. So determining its own risk appetite is a central precondition for the PE fund in order to set a reasonable target return rate. Then, for its given risk appetite, the market return rate of comparable assets in the same risk bracket needs to be researched and should form a "floor level" of expected returns. This can then be transformed into a "decision grid" for each investment opportunity to come to a go or no-go decision.
But a I said - the actual case and the required analysis dirung the case can branch off into many different directions.
Cheers, Sidi
Hi Anonymous,
well, the question is very unconcrete and the case could go into a million directions. But here is a fundamental line of thinking that should be employed:
I would start by making explicit the relationship between return rate and inherent risk of an investment class. So determining its own risk appetite is a central precondition for the PE fund in order to set a reasonable target return rate. Then, for its given risk appetite, the market return rate of comparable assets in the same risk bracket needs to be researched and should form a "floor level" of expected returns. This can then be transformed into a "decision grid" for each investment opportunity to come to a go or no-go decision.
But a I said - the actual case and the required analysis dirung the case can branch off into many different directions.
Cheers, Sidi