Jerome Schneider, Sean Klein, Wade Sias, Simon Fan
{"title":"Practical Applications of Cash for Calls: A Quantitative Approach to Managing Liquidity for Capital Calls","authors":"Jerome Schneider, Sean Klein, Wade Sias, Simon Fan","doi":"10.3905/pa.2023.jaipa066","DOIUrl":null,"url":null,"abstract":"In <ext-link><bold><italic>Cash for Calls: A Quantitative Approach to Managing Liquidity for Capital Calls</italic></bold></ext-link>, from the Fall 2022 issue of <bold><italic>The Journal of Alternative Investments</italic></bold>, <bold>Jerome Schneider</bold>, <bold>Sean Klein</bold>, <bold>Wade Sias</bold>, and <bold>Simon Fan</bold>, all of <bold>PIMCO</bold>, provide an approach to address the difficult task of minimizing cash drag while ensuring that limited partners can meet capital calls for private investments. By analyzing cash flow data for private equity, private debt, and private real estate funds, the authors quantify the extent of cash drag experienced when committed, but uninvested, capital is held in cash. They also illustrate the danger of holding the capital in public market equivalents (PMEs). Using historical call rates, the authors then simulate a tiering approach to holding committed capital in assets that have a range of risk and return characteristics and dynamically adjust the allocation. They show this strategy performs similarly to constant proportion portfolio insurance. The portfolio grows when the market outperforms, due to commitments that are partially allocated to PMEs, while an allocation to safe tiers protects the portfolio in market downturns.","PeriodicalId":500434,"journal":{"name":"Practical applications of institutional investor journals","volume":"71 1","pages":"0"},"PeriodicalIF":0.0000,"publicationDate":"2023-03-10","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"0","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"Practical applications of institutional investor journals","FirstCategoryId":"1085","ListUrlMain":"https://doi.org/10.3905/pa.2023.jaipa066","RegionNum":0,"RegionCategory":null,"ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"","JCRName":"","Score":null,"Total":0}
引用次数: 0
Abstract
In Cash for Calls: A Quantitative Approach to Managing Liquidity for Capital Calls, from the Fall 2022 issue of The Journal of Alternative Investments, Jerome Schneider, Sean Klein, Wade Sias, and Simon Fan, all of PIMCO, provide an approach to address the difficult task of minimizing cash drag while ensuring that limited partners can meet capital calls for private investments. By analyzing cash flow data for private equity, private debt, and private real estate funds, the authors quantify the extent of cash drag experienced when committed, but uninvested, capital is held in cash. They also illustrate the danger of holding the capital in public market equivalents (PMEs). Using historical call rates, the authors then simulate a tiering approach to holding committed capital in assets that have a range of risk and return characteristics and dynamically adjust the allocation. They show this strategy performs similarly to constant proportion portfolio insurance. The portfolio grows when the market outperforms, due to commitments that are partially allocated to PMEs, while an allocation to safe tiers protects the portfolio in market downturns.
在《另类投资杂志》(the Journal of Alternative Investments) 2022年秋季刊的一篇文章中,PIMCO的杰罗姆•施奈德(Jerome Schneider)、肖恩•克莱因(Sean Klein)、韦德•西亚斯(Wade Sias)和西蒙•范(Simon Fan)提供了一种方法,可以解决最小化现金drag的艰巨任务,同时确保有限合伙人能够满足私人投资的资本要求。通过分析私募股权、私人债务和私人房地产基金的现金流数据,作者量化了当承诺但未投资的资本以现金形式持有时所经历的现金拖累程度。它们还说明了在公共市场等价物(pme)中持有资本的危险。然后,利用历史利率,作者模拟了一种分层方法,将承诺资本持有具有一系列风险和回报特征的资产,并动态调整配置。他们表明,这种策略的表现类似于固定比例投资组合保险。当市场表现好时,投资组合就会增长,因为承诺部分分配给pme,而分配给安全层的投资组合在市场低迷时可以保护投资组合。