| Shott Philosophy |
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Distribution Management Philosophy
Shott Capital Management (SCM)'s distribution philosophy is to efficiently manage the sale of distributed securities for clients.
Historically, in-kind securities were distributed by venture capital funds that had invested in small, rapidly growing technology companies. These companies were not heavily traded and getting out of the positions often meant a substantial loss for limited partners. Today not only do venture capital funds utilize in-kind securities, but more of the buyout groups are starting to look at in-kind distributions as a way of returning capital to their investor base.
The actual distribution of in-kind securities is often an inefficient and administratively burdensome process that many of today's limited partners do not understand. It is SCM's belief that overall private equity performance cannot be accurately computed until the sale has been realized and cash from settlement received.
SCM strives to eliminate the distribution effect the price discrepancy between the general partner distribution price and the amount the limited partner receives by selling the distributed securities - by proactively managing the sale of distributed securities. Our research shows that the average limited partner selling securities with the distributing broker accepts a discount of 3% to 7% versus the general partner distribution price caused by the rush to exit by some limited partners.
SCM's staff of experienced and dedicated professionals is focused on post-venture distribution management. Strong ties to the private equity community provide a unique and important complement to the firm's internal research effort.
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