Unlocking Potential An Idea !

what do you see in these people …

i see failure of capital markets (and hence a business opportunity)

everyone of us is a capital asset, producing some future cash flow cash flows differ in character We all need long term investment and active management to grow into a productive capital asset

key assumption: every child given adequate financial investment and quality parenting would develop into a productive individual

then why don’t financial institutions invest in these assets?

long term financial commitment (10 – 17 years) monitoring costs too risky and “unconventional” to be accommodated within internal risk management systems contract issues

a private equity solution …

What do PEs do? identify underperforming companies with potential take long term financial (equity) interest actively manage (involve in the business) develop business to full potential and get out

the idea a private equity fund identify poor children with no access to career development take long term financial commitment actively participate in their development into a successful, productive individual

innovative aspects … asset management structured financial products (derivatives) contract enforcement

asset management - relationship managers (RMs) Responsible for mentoring & counseling a select group of kids Close tracking and assistance Assistance in life, career choices, ups and downs Effectively a good parent

relationship managers Long term relationship with assigned kids Good parent, enjoys mentoring Max 5 relationships (a family!) Compensation includes interest in fund & future earnings from relationships

Ct = Max ( αt (Mt - βt ), 0 ), l ≤ t ≤ u financial contracts Financing depends on asset performance More talented (better performance) will lead to higher funding More talented => greater return => we invest more Payback contingent on a minimum level of income attained Ct = Max ( αt (Mt - βt ), 0 ), l ≤ t ≤ u

a typical contract cash-flow

portfolio management duration risk cash flow uncertainty managing risk levels of talent professions maturity

issues RMs – how do we get them? legal short term cash needs social – “exploitation” ??