Altoona State Investment Board & Bain Capital Fund XI

Josh   Lerner; Ted  Berk

Case | HBS Case Collection | August 2017

Altoona State Investment Board & Bain Capital Fund XI

Abstract

Considers the decision faced by state pension fund manager Rod Calhoun as he decides whether to invest $200 million in Bain Capital's eleventh global buyout fund: Bain Capital Fund XI. For the fund, Bain was offering its limited partners a choice among three different fee structures: first, a "conventional" fee structure of a 1.5% management fee with 20% carried interest and a 7% preferred rate of return; second, a 1% management fee with 30% carried interest and a 7% preferred rate of return; or third, a 0.5% management fee, 30% carried interest, and a 0% preferred rate of return. Should Calhoun invest in Bain? If he should, which fee structure should Calhoun choose?

Keywords: Capital; design; entrepreneurship; Equity method; finance; Leveraged Buyout; management; management buyout; private equity; venture capital; Capital; Design; Entrepreneurship; Finance; Leveraged Buyouts; Management; Private Equity; Venture Capital; Banking Industry; Massachusetts;

Language: English

Format: Print

14 pages

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Citation:

Lerner, Josh, and Ted Berk. "Altoona State Investment Board & Bain Capital Fund XI." Harvard Business School Case 218-022, August 2017.

Governments are important financiers of private sector innovation. While these public funds can ease capital constraints and information asymmetries, they can also introduce political distortions. We empirically explore these issues for China, where a quarter of firms’ R&D expenditures come from government subsidies. Using a difference-in-differences approach, we find that the anti-corruption campaign that began in 2012 and the departures of local government officials responsible for innovation programs strengthened the relationship between firms’ historical innovative efficiency and subsequent subsidy awards and depressed the influence of their corruption-related expenditures. We also examine the impact of these changes: subsidies became significantly positively associated with future innovation after the anti-corruption campaign and the departure of government innovation officials.

Teaching Note for HBS No. 812-129. This teaching note provides an introduction to ratio analysis as well as the different financial properties across and within industries. Students are asked to match ratios to a list of industries.

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Altoona State Investment Board & Bain Capital Fund XI

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