The Benjamin Graham Center of Excellence in Private Equity Value Investing

“The determining trait of the enterprising investor is his willingness to devote time and care to the selection of securities that are both sound and more attractive than the average. Over many decades, an enterprising investor of this sort could expect a worthwhile reward for his extra skill and effort in the form of a better average return than that realized by the passive investor.” Benjamin Graham in “The Intelligent Investor”, 1949.

The Benjamin Graham Center of Excellence in Private Equity Value Investing focuses on studying and on understanding the benefits of combining the value that private equity investment brings to the table with the gains that can be attained through utilizing the concepts of value investing developed by Benjamin Graham.  Our Center focuses on combining the use of financial leverage, core operation performance improvements, benefits of high value financial engineering and an intense focus on downside risk management that Private Equity strategies usually bring to the table with the simple and yet powerful principals of building a “margin of safety” into each deal, (looking for large gaps between a company’s real worth and its price), and putting a lot of energy and research into looking for the right acquisition target, and verifying the worth of the company; doing all those things that are the core of Value Investing. It is our belief that this combination of strategies can generate truly superior returns over time while minimizing risks.

This concept of Private Equity Value Investing, and allocating a portion of funds towards firms practicing such a unique bread of principals, can improve a portfolio's diversification and can deliver an uncorrelated type of outperformance. There is significant evidence that such a blend of techniques can outperform the industry and provide a much more valuable level of service to the investors as the fees charged for such services are generally similar to what a typical PE firm charges, but the amount of work that goes into each PE Value Investing deal is far more compared to what a typical PE firm does, and this expenditure of time and energy in most cases will pay off tremendously for both the investors and the PE firms. According to Cambridge Associates the 10-year returns generated by the PE industry on behalf of their limited partners after fees (13.7% annualized), can  be significantly improved through the combined strategy of Private Equity Value Investing. As private Equity performance is already less volatile than that of other classes such as mutual funds, adding Value Investing into the mix and buying steady, profitable businesses when they disappoint Wall Street, and focusing on conservative names will bring even more stability opening up the private equity market for investors with a lower risk tolerance and creating a unique platform for substantial returns at much lower risk. And this would be even more likely in bad markets where the public is acting on emotions. There would be far fewer losers in the portfolio, and the investors would experience higher and more numerous wins. As private equity relies heavily on leverage, adjusting for risk through Value Investing is especially important as even a minor difference, can generate huge gains in profits over the long term. This is even more so in private equity firms investing into banks and the insurance companies as banks and insurance companies are already highly leveraged businesses.