It's actually quite complicated:
- Each CD Fund invests in a different mix of sectors (e.g. CD3 and CD4 have a lot more in tech)
- They are at different stages in lifecycle (CD1 being the oldest and CD4 the youngest). There will be no new investments for CD1 and CD2.
- They have different U.S. sub-fund managers who may be more or less aggressive in carrying valuations.
- The carrying valuations themselves compared to invested amounts vary a lot (CD3 and CD4 ratios are higher than CD1 and CD2).
- They have had different proportions of carrying value based on subsequent transactions (which is more reliable, especially if recent).
- They have different levels of cash holdings and commitments/needs for cash recycling into current investments
- CD1 and CD2 are free of GP Fees (~2%) and performance fees. CD3 and CD4 are subject to both.
But the major issue is that E&P are horribly incompetent and self-serving in managing these funds.
As just one example, see my post on CD3 holdings:
https://cdprivateequityfundinsights.blogspot.com/2023/03/what-companies-do-cd3-lp-funds-own-as.html<<
Previously, I detailed the specific companies owned by CD2 and CD4.
Since then, E&P has actually deleted it's website pages that listed portfolio companies! Is that an appropriate action for a Responsible Entity?!>>
Their investors have voted overwhelmingly against their proposal to merge the funds, end self-liquidation, and continue operating them as an indefinite evergreen fund. But E&P has no interest in doing what's in the interests of the funds' shareholders.
For example, consider the 8 obvious things E&P could do to narrow the discounts:
https://cdprivateequityfundinsights.blogspot.com/2022/10/what-can-be-done-to-reduce-nav-discount.htmlNot only hasn't it done any of them, but it appears to be moving in the opposite direction: even less work and concern for shareholders or its professional responsibilities. Hence the deletion of the portfolio company pages mentioned above! That's a deliberate slap in the face if I ever saw one!!
Beyond the discounts/liquidity, there are some major issues like tax that require a genuinely Responsible Entity and Directors actually serving shareholder interests. The CD Funds need to change both and this will be a big step forward even if we have to take a haircut to achieve it.
