Jack Levin Discusses Developments, Fund Formation at IVCA/NVCA Luncheon

May 21, 2007

CHICAGO - “ Nearly 180 investors and IVCA members were on hand on May 9 for a presentation on new developments in private equity, venture capital and fund formation provided by Jack Levin of Kirkland & Ellis.

Levin's presentation highlighted the annual IVCA/NVCA luncheon at the University Club of Chicago. He began his detailed and comprehensive overview with a timely update on how Congress is studying taxation as it relates to carried interest on private equity funds.

While no legislation has been introduced, the Senate finance committee earlier in May held a closed-door meeting to discuss potential tax consequences for individual managers of private equity funds.

Levin pointed out that it is unclear if carried interest should be defined by Congress as compensation for services.

Further, there is little information as to what point carried interest would be accounted for and if legislation would cover all private equity, just - œlarge-  funds or other specific subcomponents like venture capital, mezzanine and real estate funds.

Ultimately, according to Levin, more taxation will ultimately lead to - œturmoil-  in the venture capital and private equity industries. He says this would negatively affect the U.S. economy at large.

Levin then discussed the recent trend of private equity firms selling shares of itself and/or its funds to the public markets. He pointed out that while going public can lead to a windfall for existing fund managers, it could limit long-term incentives for other investment professionals involved with the fund.

As well, firms going public are more likely to acquire other private funds. Ultimately, he said, the pressure to monitor an investment portfolio on a quarterly basis (as opposed to the longer cycle private funds traditionally have) may limit the types of deals a publicly traded fund can make.

This may lead to better investment opportunities for firms that remain privately held. Levin also dissected Sam Zell's acquisition of the Tribune Company and the tax implications of structuring the deal within an ESOP.

Prior to Levin's presentation, NVCA President Mark Heesen spoke about how the national association is dealing with how Congress is looking into the carried interest issue.

- œThere is a very technical debate over what carried interest is and how it can treated,-  Heesen said. - œLet's let the technocrats do their jobs. At this point, we will lose on a political and emotional level. In the end, we are served better keeping this at an analytical level.- 

IVCA executive director Maura O'Hara provided the opening remarks for the luncheon. She noted that there are now 67 investor firms with the IVCA. Non-investor members and more than 75 pension funds are also included in the IVCA online database.

She also announced that the next Midwest Venture Summit will be held on March 18, 2008.