Super Returns
Madeleine before pre-school yoga. It is supposed to be a relaxing thing. The private equity Super Return conference takes place in Berlin and this year I opt out (private equity BTW is private investors buying a non-listed or private company's stock). The conference normally attracts two to three thousand investment professionals ranging from the general partners (GPs) who manage venture or buy-out or other types of funds and limited partners (LPs) who supply the managers their dough. LPs are fund-of-funds (get it?), pensions, insurance companies, banks, endowments, foundations and so on and so forth. It is usually an exciting affair with plenty of net-working and late nights - a number in our industry have become famous like Henry Kravis or Stephen Schwarzman and certainly many have become rich. Very rich. Despite private equity's growth and success these past twenty odd years, the market has turned and we are by no means immune. Bigger firms have produced their results via leverage which today no longer exists and worse, weighs on the portoflio like a heavy anchor. Many cherished, private equity backed businesses will fail. A source of industry liquidity has been secondary buyers who purchase limited partner positions in the after-market (or secondary market) which generally trades around 3% of the primary market and today may be at 10% or 15%; even this group hesitates given the debt loads - nobody believes we are at the bottom. The last few years at the Super I have pondered the audience's homogeneity - almost entirely men with maybe 100 women and no minorities. Further, everybody looks the same with healthy cheeks, slicked hair and Hermes ties. No doubt it is mature and consequently buyers looking at the same deals bidding them up presumably. Until now - no debt, no deal, at least for the bigger transaction. The good news I suppose is that GPs have every interest in saving their troubled companies and are the most willing to stump up cash, if needed. I have seen this first-hand, much to the detriment sometimes of the remaining portfolio but hey, this be human nature.
"If you don't like change, you're going to like irrelevance even less"
General Eric Shinseki, former chief of staff of the US Army
