Zimmermann, discussing liquidity with Neumann, tells him, “If the fund adds the private equity allocation you recommend, it will be infeasible to rebalance to our model allocation on an annual basis. However, because we will experience much higher returns from private equity than we’ve been getting from the fixed-income securities being replaced, we should have no problem increasing our current spending rate, as requested. If we experience an economic downturn, a private equity position improves our overall liquidity because privately held firms are subject to fewer market pressures than publicly traded ones.”
In her discussion of liquidity issues, Zimmermann is most likely correct regarding:
A.
annual portfolio rebalancing.
B.
maintaining current spending levels.
C.
the impact of an economic downturn.
A is correct. Private equity requires a long-term commitment of capital with very uncertain drawdowns of that commitment and return of invested capital. Early in the investment cycle, only a portion of the committed capital will be called by the general partner and the timing of future calls is uncertain. Later in the investment cycle, the timing of a fund’s sale of investments and return of capital to investors is uncertain. The investment itself is very illiquid (hard to sell in the secondary market); thus, rebalancing to a model allocation on an annual basis will be infeasible.
B is incorrect. Early in the private equity investment cycle, committed capital will be held in relatively liquid assets with lower expected returns to fund capital drawdowns that have uncertain timing. Further, little return will be realized from early-stage investments, particularly on the venture capital side of private equity. Also, bad investments tend to fail earlier than good investments succeed. Overall, private equity is subject to a J-curve, with low or even negative returns early on and high returns later on. For these reasons, the portfolio’s overall return will be lower in early years, reducing the endowment’s available spending according to its current spending rules and making it difficult to increase the spending rate in two years.
C is incorrect. In an economic downturn, capital calls for a newer private equity fund can accelerate because depressed market prices produce good investment opportunities precisely when the endowment portfolio’s public asset values are depressed. This can require either selling portfolio assets for negative returns to fund capital calls or abandoning the investment in private equity at a total loss. Further, in an economic downtown, the general partner of a more mature private equity fund will extend the fund’s life and avoid selling holdings at depressed prices, thereby reducing cash flows the endowment portfolio had anticipated.
Q1.这题我选的是B，我是这么理解这个选项和题目的，However, because we will experience much higher returns from private equity than we’ve been getting from the fixed-income securities being replaced, we should have no problem increasing our current spending rate, as requested.
将私募股权投资替换成固定收益证券后，我们会体验到更高的回报，因而毫无疑问我们可以按要求提升我们花钱的速度。 我认为这句话表述正确所以选这个选项。
我这一逻辑链在哪里有错？
Q2:这道题能否帮忙翻译解释一下（C选项不用）
Q3：我翻了品职这一节课件，在流动性问题里面 也没有提到私募股权的再平衡问题，这一考点具体是哪个？
（麻烦认真回应）
