Wednesday Warblings

They sky is gray, Doc Rivers still deserves a firing and I’m just now realizing how packed my travel schedule is for the rest of January (North Carolina, Philly, Pittsburgh and London). In other words, it’s time for some Wednesday Warblings.

Let’s begin with the Ohio Bureau of Workers’ Compensation disclosure mess. Specifically, there were lots of emails related to last Friday’s discovery that OBWC had asked GPs for new copies of lost documentation like LP subscription agreements. I felt this type of disarray was further proof that OBWC was probably the dumbest of all dumb money, and that GPs would be reticent to send in such documents while the disclosure issue was still up in the air. Larry writes: “Whoa boy.You are getting a little carried away. Trust me, there are lots of LPs that couldn’t put their hands on original subscription docs, LP agreements let alone side letters. GPs have no right to refuse this information as it relates to the investment in their fund and I assume they intend to hold OBW to its commitment. I agree OBW is acting outrageously regarding disclosure --- but this request is quite legitimate. I think you damage your credibility when you make mountains out of molehills.”

Regular respondent Philip chimes in: “Depending on the original agreement, they may have to grant the request whether they want to or not. I would suggest that even if the document does not require the document to be sent that the GP should at least send the portion of the document that covers confidentiality. As to the second part, yes I can imagine an institution losing documents affiliated with multi-million dollar investments. I worked for a large institution for almost 15 years. On more then one occasion, I had to get replacements because the original documents could not be found. Although the investments may be for millions of dollars, the people doing the filing were frequently paid only slightly above the minimum wage. I can only imagine what the files would have looked like after large-scale investigation of all the investments by an outside firm.”

Finally there is Declan, who asks: “Sure Monica really appreciates being quoted without her permission? If she had meant the email to you she would havesentit to you.” Indeed it would have been easier had Monica sent it to me, but governmental organizations rarely send reporters memos that explicitly declare their own incompetence. If you’d prefer no more reporting of confidential letters, this might be the wrong publication to read.

Adam writes more generally on OBWC: “An observation here is the obvious learning curve and access issues when starting a private equity program. I wonder if OBWC could have done better by committing to an established fund-of-funds manager earlier and who would have steered the pension dollars towards some stronger performing funds in early 2000. Second, it is not really fair that Lexington Partners (predominately a secondary FoF) gets compared to HarbourVest (true FoF with a secondary component). A secondary fund will have a higher IRR because the assets they acquire are more mature and do not suffer from the J-Curve like a HVP fund would.”

*** Moving on, a few comments on the concept of “reverse auctions.” S writes: “I don't buy into the concept that strategics could develop a‘reverse auction’ market for VC-backed companies. In my experience (having served in a BizDev function for a Fortune5 company and in private practice representing VC/PE funds), the number of strategics looking for great technology always exceeds the number of VC-backed portfolio companies hawking same. Any price depression that results from the narrowingof the IPO window and the greater dependence on the M&A door probably results from the increased sophistication among the pool of purchasers.”

Ronald takes a more charitable view: “The idea of reverse auctions is completely industry-dependent. You’re not, for example, going to see it in retail or manufacturing. But it makes sense for VC-backed tech, which is what I assume Lax was talking about. I don’t think it’s there yet, but there have been a lot of second, third, fourth and even fifth movers in the tech space lately, particularly in terms of Web 2.0.”