Private Equity: Turning IRR into ROR

Tailwind Investment Partners

Bill and Lauren Johnson sold their third-generation family chemical manufacturing business in Ohio and suddenly their investment portfolio had grown from just below $5 million to $50 million.  With such a large change in the size of their investment portfolio, the Johnsons decide to have dinner with their longtime friend, Lori Clark to ask for her investment advice. Lori has spent the past 12 years as the Chief Investment Officer for Gulfstream 77, her family’s Family Office.

Lori explains investors with $50 million portfolios typically have many additional investment options that are not available to investors with $3-4 million. One of the biggest differences is how much is allocated to private equity. She shares with the Johnsons that, on average, family offices allocate 29% of their portfolios to private equity.

In the Tailwind white paper, Private Equity: Turning IRR into ROR; we will employ a hypothetical example to help explore three pathways for allocating to private equity with the aim of obtaining and maintaining private equity exposure – therefore turning IRR into ROR:

1) Single private equity investment to a primary private equity fund

2) A diversified vintage-year, approach that spreads the investment equally over 10 years in primary private equity funds

3) A private equity program that involves investing in seasoned private equity investments through secondary fund of funds and maintaining exposure by reinvesting excess cash flows

Please read the white paper Private Equity: Turning IRR into ROR to learn more about each pathway and along the way learn how to turn IRR into ROR.

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