Investment Life Cycle Research Articles

Control strategies for impactful exits in impact private equity firms

AbstractTraditional private equity firms aim to maximise their financial returns when exiting an investment. In contrast, a major consideration for impact private equity firms is to ensure an impactful exit from their investments – increasing the chance of impact continuity in portfolio companies post exit. However, impactful exits may not be realised due to ownership‐, management‐, and operations‐related threats. Drawing on data from 45 impact private equity firms, we identify the control strategies that impact investors use throughout the investment lifecycle to manage impactful exits from investment. We also highlight how control‐related issues differ between traditional and impact private equity firms.

Making sense of project governance and its role in strategy implementation: a governance-as-practice perspective

PurposeThis paper examines how expert practitioners define project governance and develop a project governance system that enables strategy implementation through projects.Design/methodology/approachSemi-structured interviews were conducted with project governance experts and analyzed the data using thematic analysis. Subsequently, based on the stratified ontology of critical realism, retroductive theoretical triangulation was employed to explain the themes identified using five emergent theoretical perspectives.FindingsBy integrating the themes extracted from the data with the emergent theoretical perspectives, a framework was developed outlining the general process through which practitioners make sense of the concept of project governance, formulate an appropriate project governance system for their respective organizations and manage its evolution over time. Furthermore, a holistic approach to project governance was proposed that spans the entire investment life cycle of projects and enables the implementation of strategy through projects.Practical implicationsThis study attempts to make sense of the diverse interpretations of the concept of project governance adopted by practitioners. It further summarizes valuable insights from expert practitioners for formulating and enacting effective project governance systems.Originality/valueThis study contributes to the governance-as-practice perspective and the growing stream of literature that views projects as investments. The project governance system is positioned as the steward of an organization's investments in projects.

ESG-інвестування у критичну інфраструктуру в період повоєнного відновлення України

The problem of investment is one of the urgent issues for our country. Ensuring investment in critical infrastructure objects in conditions of hostilities and against the backdrop of the destruction of this infrastructure is associated not so much with economic growth as with the current survival of the country , burdened by continuous military actions. The need for more dynamic development of investment processes aimed at attracting ESG investments in critical infrastructure has been emphasized. The aim of the article is to explore the prospects of ESG investment in critical infrastructure during the post-war recovery period of Ukraine. It has been established that the ESG concept is a modern trend in the investment space that needs to be considered and implemented in practice. The importance of implementing ESG criteria has significantly increased in recent decades and is expected to grow even faster in the near future. Most infrastructure funds view ESG as a driving force that enhances the value and stability of portfolio companies against the backdrop of constant global changes. To benefit from the opportunities provided by ESG investment, it is necessary to consider ESG criteria (environmental, social, and governance) at every stage of the investment life cycle. ESG is increasingly becoming a requirement for investment compliance. It has been established that ESG investment, as the implementation of the ESG concept, contributes to positive changes in society, preserves the environment, etc. However, in the case of the urgent need for rapid and effective post-war recovery of critical infrastructure in Ukraine, it will significantly complicate the process since compliance with ESG criteria, which could be ignored earlier, will have to be followed. The need to change the regulatory framework regarding the inclusion of ESG investment specifics and to transform approaches to investment in the domestic business community is mentioned because the international business community seeks to invest its capital in enterprises and territories that meet ESG criteria. For Ukraine, transformation aimed at meeting the requirements for ESG investment is both a challenge and a necessity for integration into global investment processes.

РАЗРАБОТКА ЭКОНОМИКО-МАТЕМАТИЧЕСКОЙ МОДЕЛИ МОНИТОРИНГА СОВОКУПНОЙ СТОИМОСТИ РИСКОВ СИСТЕМЫ УПРАВЛЕНИЯ ИНВЕСТИЦИОННО-СТРОИТЕЛЬНЫМИ ПРОЕКТАМИ

When managing the processes of implementing investment and construction projects, conditions of varying levels of uncertainty arise, giving rise to risky situations. Ignoring risk situations when implementing investment and construction projects leads to the emergence of risk combinations and increased risk costs and eliminating their consequences. Determining the risk intensity of a risk situation (combination) is becoming increasingly relevant; in this regard, the relevance of developing a model for monitoring the total cost of risks of investment and construction projects is increasing.
 The purpose of the study is to develop an economic and mathematical model for monitoring the total cost of risks of investment and construction projects. It has been established that in the military sphere, the amount of material costs for product development is significantly influenced by risks associated with the internal and external environment. This article examines existing models of investment and construction projects and identifies their distinctive aspects. The novelty of the ongoing research lies in the author’s approach to developing a model for monitoring the total cost of risks at various stages of the life cycle of investment and construction projects. The practical significance of the results lies in the possibility of monitoring the total cost of risks of investment and construction projects at all stages of its life cycle, estimating, based on the proposed model, the final total cost of investment and construction projects by summing up all the total costs of risks of the stages of investment and construction projects. These measures are aimed at preventing a risk situation or risk combination and ensuring the implementation of investment and construction projects. A design-process approach to feasibility studies and process management of investment and construction projects is proposed.
 Recommendations for applying the results obtained are the need to assess the total cost of risks of investment and construction projects at all stages of its life cycle in order to determine the source of its occurrence.

How impact investing firms use reference frameworks to manage their impact performance: An industry‐level study

AbstractUsing meaning‐oriented content analysis, we show how impact investing firms use various reference frameworks (e.g., International Finance Corporation (IFC) Performance Standards, Impact Management Project framework, UN Sustainable Development Goals) to manage their impact performance throughout the investment lifecycle. Our study provides an industry‐level picture of the various roles that different reference frameworks play to help impact investors attain their impact goals. We also discuss the potential industry effects on management accounting practice, that is, how reference frameworks used in performance management in the impact investing industry differ from those used in some other industries.

An embedding-based text classification approach for understanding micro-geographic housing dynamics

In this article, we introduce an approach for studying micro-geographic housing dynamics using an embedding-based, semi-supervised text classification approach on longitudinal, point-level property listing data. Based on the text used to describe properties for sale and a set of predefined classes and keywords, listings are classified according to their lifecycle of investment or disinvestment. The mixture of property types within 1 × 1 mile grid cells are then calculated and used as input in a clustering algorithm to develop a place-based classification that enables us to examine patterns of change over time. In a case study on Mecklenburg County, North Carolina using 158,253 real estate listings between 2001 and 2020, we demonstrate how this approach has the potential to further our understanding of housing and neighborhood dynamics by grounding our analysis in theoretical concepts around the housing lifecycle and its relationship to neighborhood change.

Value adding in venture capital as a mesh of practices

PurposeThis paper aims to adopt a practice-theory, “site ontology” perspective to understand how venture capitalists (VCs) add value to their portfolio companies (PCs).Design/methodology/approachThe empirical research involves a field ethnographic study of a VC firm in Dubai, focused on revealing what constitutes value and what VCs do to add this value to their PCs.FindingsValue adding is a profoundly social, embedded process interconnected with other ecosystem actors, investment practices and organizations. The value adding threads of VC activity are part of a holistic configuration of practices that span the investment lifecycle and different levels within the firm.Originality/valueThis research contributes a rich account of the social, symbolic nature of VC activity, depicting the everyday activities that comprise value adding practices. It is among the first to introduce practice theory to the VC context and open up a new conversation about its social ontology.

Mechanism for Increasing Rating of ESG-Factors of Construction Investment Life Cycle

Environmental, social and governance (ESG) issues are a key factor in investment decisions due to their rise in the public and corporate area. It is well known that integration of environmental, social and corporate governance (ESG) makes companies in the construction industry less vulnerable to economic, technological, political and regulatory risks, which results in diminishing cash flow volatility and enhances profitability at all phases of construction investment life cycle. Currently, there are a number of ways to include ESG factors in construction investment life cycle. One of the fundamental ways is "green" construction. Russian and foreign researchers consider green building to be an integral part of the global ecosystem, which is characterized by being environmentally-friendly, energy and resource efficient. Analysis of modern scientific literature reveal certain issues of "green" construction, most of which arise due to enhanced investment costs compared to conventional construction projects. Based on this, it is relevant to look into the market of modern green construction in Russia, outline directions of its development and overview modern technologies used in green construction. The authors propose ways to assess efficiency of green construction and estimate pace of development of the ESG factors of construction investment life cycle.

ОПРЕДЕЛЕНИЕ СМЕТНОЙ СТОИМОСТИ СТРОИТЕЛЬСТВА НА РАННИХ СТАДИЯХ ЖИЗНЕННОГО ЦИКЛА ИНВЕСТИЦИОННО-СТРОИТЕЛЬНЫХ ПРОЕКТОВ

The article discusses some topical issues of determining the estimated cost of construction at the early stages of the life cycle of investment and construction projects. A technique for calculating the estimated cost of construction using several analogous objects is proposed. Research of the algorithm and results of calculations performed according to the proposed method were carried out. Conclusions on the work of the methodology and the scope of its application are formed.

NET PRESENT VALUE (NPV) AS A REINFORCEMENT OF THE DECISION-MAKING PROCESS IN TERMS OF INVESTMENT SELECTION

Adequate competition, technical and technological development require enterprises to constantly change and make new investments. Investment is the ongoing expenditure of resources for future benefits. Investments usually involve the commitment of considerable cash resources and manifest themselves in the growth or replacement of tangible fixed assets. Each investment has an individual investment life cycle. The distribution of inflows and outflows associated with the preparation, implementation and operation of an investment. NPV is the net present value, or present value of future cash flows. This indicator predicts what income can be expected from a given investment in terms of the present value of money. Objective decision-making instruments can be constructed using the NPV method. NPV, as the difference between the present values of cash inflows and cash outflows analyzed over a period of time. NPV makes it possible to compare the money that needs to be paid to complete a planned investment with all the cash flows that the company will generate in the future. The NPV method is considered to be the most theoretically correct method for evaluating the profitability of investment projects. There is also a steady increase in interest in it in business practice. The advantages of the NPV method is that it takes into account the entire life cycle of the investment, all cash flows and changes in the value of money over time. A positive NPV value means that the investment contributes to an increase in the value of the company

Do Private Equity Investors Create Value? Evidence from the Hotel Industry

We show that PE sector specialists outperform generalists at every stage of the investment life cycle. Using granular data for thousands of U.S. hotels over the last two decades, we document that specialists exert a greater positive influence on more margins of hotel operations, earn higher net cash flows over the holding period, and achieve larger capital gains upon exit than do their generalist peers and other, non-PE investors backing ex ante equivalent assets. By contrast, PE generalists’ strongest comparative advantage may be better access to attractively priced acquisition financing. Our results provide novel evidence on the heterogeneity of PE investment strategies and associated performance outcomes.

Modeling and Optimal Dimensioning of a Pumped Hydro Energy Storage System for the Exploitation of the Rejected Wind Energy in the Non-Interconnected Electrical Power System of the Crete Island, Greece

The aim of the present paper is to investigate the use of the site “Potamon” Dam in the Prefecture of Rethymnon, Crete island, Greece, as a “virtual” renewable electricity supply of a pumped storage plant (PSP) in order to save and exploit the maximum possible part of the rejected wind energy of the autonomous power system of the Crete island. Taking into account the annual time series of the rejected power of the Crete power grid, the present research work targets the optimal configuration of the proposed PSP power station, including the sizing of its individual components as well as the determination of the capacity it could guarantee in order to be economically viable. The rejected electric energy from the actually operating wind farm production, which is not possible to be absorbed by the grid of Crete due to its stable operation limitations, could be absorbed by the here proposed pump storage plant (PSP) and converted to hydraulic energy. This can be achieved by pumping the water from the lower reservoir, which is the existing reservoir of the site “Potamon” Dam, with a storage capacity of about 22.5 million m3, up to the upper reservoir, which must be constructed accordingly. For the proposed PSP’s optimal size determination, established financial indices are used as an evaluation criterion for an investment life cycle of 25 years. The proposed PSP optimization is based on the dynamic mathematical model of the simulation results of the PSP’s hourly operation when incorporated in the Crete power grid for a whole year, performed in the Matlab 2016b computational environment (The MathWorks, Inc., Natick, MA, USA). The results of this research demonstrate the PSP’s technical feasibility and determine the PSP’s optimal CAPEX and the PSP’s whole life-time financial indicators in order that the whole investment be viable. Furthermore, the appropriate selling prices of the electricity produced from the proposed PSP were determined to achieve the PSP’s financial viability. The results comprise the key elements to prove the necessity for the establishment a.s.a.p. of the appropriate legal framework in order to have authorization to exploit the rejected RES (renewable energy sources) electric energy or the major part of it through PSPs, in priority in both the non-interconnected, as well as the interconnected power systems.

Risk Analysis in Renewable Energy System (RES) Investment for a Developing Country: A Case Study in Pakistan

Technological improvements allow changing a significant part of the electricity generation investments to renewable energies. Especially in emerging markets and energy import-dependent countries, shift to renewable energy generation became more important to break the links of dependency. Pakistan relies on imported fossil fuels; however, the country’s experience and ambition about the renewable energy transition gain prominence in recent years. Considering the long-term life cycle of energy infrastructure investments, possible risk factors and their dynamic nature must be analysed before the financial decisions are taken. This article aims to propose a system dynamics model for the risk analysis of investment life cycle. In this study, possible risk factors are detected and discussed in different categories. The casual loop diagram of possible risk factors and risk assessment model are designed, and the impacts are analysed. Case study of the proposed model in Pakistan highlighted the importance of commercial risks. The results achieved through this study will guide investors, sector participants and policymakers to develop stable strategies for promoting renewable energy in the country. JEL: Q42, P48, O13

ПРИМЕНЕНИЕ AGILE-МЕТОДОВ И LEAN PORTFOLIO MANAGEMENT (LPM) В МОТИВАЦИИ КОМАНДНОЙ РАБОТЫ КОМПАНИИ

The world is changing rapidly, and customer expectations are changing just as quickly. The speed of change encourages companies to invest heavily in digital and agile transformations that scale and bring the benefits of agile teams to the enterprise level. However, few people achieve the desired results. To fully implement digital or agile transformation, commercial and technology teams must achieve and maintain consistency. Full company-wide consistency is a critical condition for competitiveness in today's economy. The difficulty of combining agile teams into an agile company is the resulting gap between the teams that do the work and the teams that distribute the funding. To bridge this gap, managers need the ability to: - increase visibility-visually present work in backlogs (for plans) and demos (for new solutions); - understand the workflow – analyze step-by-step results to assess progress towards achieving the final results; - optimize investment-change strategy or persistently follow a plan, reallocating funds to maximize the delivery of value. In an effort to achieve and maintain consistency, companies often find that traditional portfolio management methods are ineffective. Instead, many implement Lean Portfolio Management techniques to ensure consistency across the organization. The Lean Portfolio Management (LPM) methodology describes the principles of lean management that top management applies to align strategy with execution. Portfolio management teams study the company's strategies and allocate budget funds to implement this strategy. Like any portfolio, an LPM investment portfolio can be creatively defined as well as actively managed throughout the investment lifecycle. LPM focuses on aligning agile development with business strategy and creating value for customers through product and solution development. LPM in combination with agile development methods allows you to increase the flexibility of your business.

Towards G20 Guiding Principles on Investment Facilitation for Sustainable Development

There is growing support behind an international framework to facilitate investment for sustainable development. This policy brief suggests that the G20 consider adopting guiding principles on investment facilitation for sustainable development, to help ensure that these efforts result in an effective, coherent, and development-oriented outcome. To this end, this brief proposes guiding principles to: (1) orient investment facilitation, (2) facilitate sustainable FDI, (3) integrate facilitation throughout the investment lifecycle, (4) engage in multistakeholder consultations, (5) ensure shared responsibilities, (6) encourage cooperative activities, (7) adopt a whole-of-government approach, (8) focus on national efforts within a multilateral framework, and (9) support capacity building coupled with flexibility.

EVALUACIÓN ESTRATÉGICA DE LAS ORGANIZACIONES ORIENTADAS A PROYECTOS

El proyecto constituye la unidad básica organizativa de las empresas que inciden de manera decisiva en su progreso. La Dirección Integrada de Proyectos permite el desarrollo de buenas prácticas, mejora continua, gestión del cambio, integración y sinergia empresarial. La política de dirección por proyectos, el uso de indicadores y las tendencias en un proceso estratégico integrado de dirección son la base fundamental para el desarrollo de la Inteligencia Empresarial. El trabajo tiene como objetivo el desarrollo de un modelo de evaluación estratégica para las empresas que trabajan por proyectos en la DIP orientadas al Modelado de Información de Construcción. A través de la aplicación de un modelo de evaluación estratégica en el ciclo de vida de la inversión, se permite compartir el comportamiento de los indicadores en los cortes estratégicos entre directivos, equipo y partes interesadas, para proceder a la toma de decisiones en un proceso integrado de dirección. La...

Digital innovative production on the basis of formation of an ecosystem of services and resources

In article development of digital models of administrative, technological and logistic processes for the large industrial enterprises on the basis of formation of an ecosystem of virtual doubles (avatars) with application of the methods of industrial analytics (Big Data) allowing to transform the existing processes by criteria of chains of value added is considered. The novelty of the offered approach consists in development of the complete theory and practical mechanisms of transformation of administrative, technological and logistic processes at the level of the separate enterprises with use of the latest information technologies (processings of large volumes of information, foggy calculations, digital avatars, technologies a blockchain, etc.) that will provide cardinal change of business processes at the enterprises and technologies of preparation and decision-making. The cross-disciplinary character of the offered research has caused a problem of inclusion in a scientific turn of new sources, reconsiderations of development of a scientific thought, the principles and mechanisms and also regularities of economic development on micro, meso – macro – and megalevels of management. Within the further researches it is offered to develop mechanisms of realization and to support the initiatives of formation of pilot projects (testbet) for development of the concept of digital factory (plant) (clever factory, virtual factory) regarding interaction of technologies of digital design and modeling. Introduction of results of the offered research in practice of management will allow to provide the general growth of economic and innovative activity of the industrial enterprises, reduction of average duration of realization of life cycle of investment and innovative projects and also increase in their quality. The social importance of the planned results of the project consists in obtaining the accompanying social effects of their practical introduction which, first of all, consist in the predicted increase in level and quality of life of the population ofRussia.

The effect of early and salient investment experiences on subsequent asset allocations—An experimental study

In two experiments on sequential asset allocation decisions between a safe and a risky asset, we find that an early market crash leads subjects to invest less in a risky asset in later periods, a result that is mediated by gender. In the first experiment subjects who experience a market bust early in the investment lifecycle invest less in a risky asset compared to subjects who experience a market boom, even when the subjects receive the exact same return stream over twenty periods. In the second experiment we manipulated the size and timing of the market crash and find that the “size” of a bust matters more than its timing. Changes in beliefs about future stock market returns correlate strongly with short-term changes in stock allocations but cannot explain the persistence of decreased stock allocations for subjects exposed to early market crashes in contrast to some prior literature.

On the effects of changing mortality patterns on investment, labour and consumption under uncertainty

In this paper we extend the consumption–investment life cycle model for an uncertain-lived agent, proposed by Richard (1974), to allow for flexible labour supply. We further study the consumption, labour supply and portfolio decisions of an agent facing age-dependent mortality risk, as presented by UK actuarial life tables spanning the time period from 1951–2060 (including mortality forecasts). We find that historical changes in mortality produce significant changes in portfolio investment (more risk taking), labour (decrease of hours) and consumption level (shift to higher level) contributing up to 5% to GDP growth during the period from 1980 until 2010.

Continuous Business Case Usage in the Context of a Strategic IT Enabled Investment at Rabobank

It has been argued that optimal value creation from IT enabled investments requires a business case that is used throughout the entire investment lifecycle, as opposed to an approach that terminates when the investment is formally approved. This approach requires a rational transformation in the perspective on business cases in which they need to become a living document that is frequently updated and matures along the investment. This study presents the business case process for a strategic IT enabled investment at Rabobank. The case site was specifically selected for being a high-performer in the area of continuous business case usage. This case study shows how a high-performer operating in an IT intensive industry makes use of a continuous business case approach during a strategic IT enabled investment and the benefits they perceive from it.