Funds that are on their way down
Which MF and UMM funds do people think are going to (or already have begun to) lose their brand/reputation/returns in the coming years?
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I hear BX, KKR, APO, WP, CD&R, Carlyle are all on their way out--def don't recruit for those
You forgot HF
.
Dude KKR is a clown show, they lost nearly 6 billion on their investment in Envision in basically 3 years, an impressive ability to screw up.
Blackstone don’t even get me started, they way overpaid for everything at the top of the cycle. They bought peak EBITDA (insanely adjusted) housing distributor ILG at 12x, I wouldn’t be shocked if they get wiped on that too.
Zero specialization or skill from either firms who deployed and fundraised on brand name alone, returns will awful this and prior vintage
KKR is becoming Apollo 2.0 with Envision
Lol calling KKR a clown show because of one anecdote is pretty silly imo
What a completely stupid 1st order thinker comment.
Just about every major fund hit an all time high in their pre-GFC era fund. Has nothing to do with trajectory of the PE firm, has everything to do with where we were in the cycle and how over their skis LP’s were getting on PE portfolio allocations.
Clearlake
Damn, someone didn’t get an offer.
no this is real
Can anyone elaborate?
They were very aggressive over the past decade and were able to produce some eye-popping returns. And their funds were deployed very fast and grew larger and larger. However, their portfolio is now starting to hit significant hurdles. Just look at the yields on the junior debt of their portcos. There are several deals that will likely result in zeroes for Clearlake.
Bearish on Insight, at least their latest fund. They deployed almost everything at the peak of the market in tech and paid (per an LP friend) a MEDIAN of 37x current ARR. They've gotten too far away from their bread and butter... now just overcapitalizing a bunch of super early stage stuff.
Advent also went all-in on tech at very high prices during the exact worst point in the cycle, but they have a sidecar vehicle to keep the main fund from being overexposed. Don't have visibility on their other verticals.
Insight also has moved way away from their DNA (early stage and growth minority deals) into LBOs because it’s easier to deploy huge checks that way. Will be interesting to see how the current vintage pans out
While I do agree that firm's like Insight/Vista that paid high prices during the last cycle might have tough returns for the current vintage, I do think there is something to be said for investing through the down cycle with reset valuations. Those funds should do well, IMO. So I think the demise of these firms, that have been doing tech for ages, is a bit overstated.
It's interesting that the popularity of a firm on WSO is kind of an indicator we're near the top of a cycle for that strategy. Search Insight or Tiger on these forums and you find many threads the past couple years of folks desperate to work there.
It's similar to the oft-repeated point about MBA career choices being a leading indicator of an upcoming bubble crashing (e.g., bankers in '06, tech PM in '20-'21).
This ... is interesting
They have also barely returned capital to their LPs while fundraising like there is no tomorrow. A lot of their marks are hypothetical. For example, their 2014 fund only has 99% DPI but a whopping 277% RVPI. And somehow they’ve raised 3 funds since 2017 and raising a fourth. This while the only DPI to show for is 30% in their 2017 fund (which by the way is also marked at 2.9x net…) and zero in the others
they definitely massively overpaid on CoreLogic--huge equity check--just in time for the worst housing market since 08
On the MF side, consistently hearing from people in the industry that Bain Capital, and TPG to a lesser extent, have also fallen quite far from grace. Agree with the comment that Insight is the real sleeping giant about to fall though.
Edit in response to the comments and MS I'm getting: It looks like I was wrong on TPG. I had only heard that about the Rise Fund. Dumb of me to extrapolate that across the whole firm.
Aren't you the A2 who admitted to being rejected from both? Lol
No? TPG doesn’t even hire consultants, but thanks for the MS lol
Edit: Looks like you work at Bain from what I can tell? Posting here at 3am on a Monday is tough, thought you guys were supposed to have slightly better hours than the rest of the industry.
Might get MS for this, but I think Vista. Vista has been hiding a few bad deals, e.g. Solera, and seems to be struggling to raise their latest fund.
They announced they were raising their newest fund between Q3 and Q4 and it still has yet to close. LPs seem to be staying away from Vista since they can get the same industry exposure from almost every PE firm now a days and Robert Smith's reputational risk.
Also, Vista's narrowness/lack of expansion with their strategy may cause them to overpay for certain deals since they essentially restrict themselves to US-based majority buyouts, when all over their competitors have PortCo's and offices internationally and their competitors are also raising growth funds, which mean they will lag in AUM growth.
They are extremely smart investors and good at what they do, but I don't see how they have an edge anymore
I don’t disagree with this one. It’s really freaking hard to deploy $10B into a single vertical (enterprise SaaS) in a single geography, especially when you have a specific company profile you target (Vista is very “playbook” heavy, which means they’ve very focused on certain business profiles). Broader SaaS interest has made these high quality software businesses very expensive, and now Vista has resorted to paying up massively to be able to keep winning auctions.
+1 on them hiding some duds as well, they’re very proud of the “never had a down investment” but eventually they’ll have to pay the Piper on a few deals.
I don’t think they’re going away and obviously great investors, just think the days of endless fund growth and phenomenal returns are probably behind them. It was easy to be a great software investor when only a few funds were doing it at that scale but it’s a whole lot harder now
1- every PE firm is “playbook heavy”
2- if it’s so hard to deploy billions of dollars into saas, how is TB doing at 2-3x that clip?
Neither was UMM or MF to begin with tbh but point taken
a16z has like 40b aum lmao wtf are you talking about
While I agree with a16z with regards to their current strategy (what is it again, lol?), they have significant leeway after their Coinbase realization.
Still, if they keep pouring 9 figures into disasters like Twitter and random crypto projects, that should eventually catch up.
Marlin is cratering. Would stay as far away as possible. Horrible place to be.
What's the story with Marlin?
.
Why?
This has been mentioned a number of times recently, what’s the reason? The metrics from outside in look good (flagship fund VIII and growth fund 2 were both way bigger than the previous iterations, Funds V and VI were marked at 24% net IRR, VII was raised right before COVID and deployed during COVID so too early to say, unless there’s bad deals that people know about that aren’t reflected in the marks?)
Tiger Global
Essentially overpaid for everything in 2021
Probably more MM than UMM but Sycamore was hit by some pretty high profile departures and probably isn’t somewhere I’d go
Absolutely shocked HIG hasn't been mentioned!
They haven't done any bad investments, as of lately. They haven't done any investments, really... and they'll pay back all of the undeployed capital back to the LPs by 4Q22. Likely the first large fund to see substantial headcount. I expect carnage!
Source: Trust me bro.
Lmao this source feels a little sus
Lol troll
https://www.wallstreetoasis.com/forum/private-equity/how-much-of-pe-is-…
Lol this reminds me of the thread (from nearly a year ago - ironically right at the market peak!) where OP was asking if PE had become a game of musical chairs for many firms.
As my comment then said, a lot of guys I know at MFs have done really well over the last few years by overpaying (beyond top-dollar) for assets… only to sell them for an even higher price 1-2yrs later due to the buoyant market. All those guys looked like geniuses at the time… and now will have to face reality I guess.
Having said that, it’s hard to judge as the problem with the last decade is that anyone who didn’t pay top-dollar for assets and stood with cash on the sidelines, got unfairly judged as “an idiot.” So many PE investors likely had no realistic alternative but to pay prices they thought were overinflated and rely on the greater fool theory. Unfortunately the music has come to an end (for now) on this game of musical chairs.
New contender: Onex
How comes?
Which funds were once great that fell apart? Know there was the fund that shut down a few years ago that started PE as an industry, THL was once a mega fund, Golden Gate is falling apart
First Reserve
jc flowers
Whats going on at Golden Gate?
Tech team quit. Think they’re force selling assets
Looks like there's lots of leadership leaving the firm as well.
think youre referring to Forstmann Little and yes it shut down a few years ago
Surprised no one posted about Siris. Returns are abysmal.
Weren't they killing it the past few years + Frank was becoming a bit of a mini financial celeb? Which ones are the albatrosses in their portfolio?
I was under the impression they were killing it with returns well into the mid double digits. Mind you this is hearsay so would welcome thoughts from anyone who knows the truth of it.
Recent funds are 1.5-1.6x net, earlier fund is 1.2x. This is from Preqin
Can confirm - interviewing with them was a joke, team did not come across smart or cared much about the job.
https://www.bloomberg.com/news/articles/2022-10-21/siris-said-to-be-clo…
Golden Gate - always had talent retention issues and lost a few of their top performers (basically the entire tech team spun out) who were responsible for some of the firm’s top investments. Not a place I’d want to be now
Anything on Marlin?
Anything on Marlin or Vector?
lol all of them. 40 year credit bull market is over yo
Bearish on the Federal Reserve and their activist credit strategies.
Morgan Stanley's PE funds have an impressive proclivity for losing money.
Sterling Partners latest fund could be described as grotesque.
Clearlake
Eh, it’s one thing to argue Clearlake’s performance is unsustainable and they’ve utilized some questionable strategies that will probably blow up going forward (and I’d certainly agree there), but kind of hard to say they’re currently “on the way down”.
Their performance the last few years has been absolutely insane (heard something like 40-50% IRRs) and the fundraising speaks for itself. So ya they do some funky stuff and I wouldn’t put my money in a Clearlake fund right now, but hard to argue their declining based on current results
What are these questionable strategies that will likely blow up?
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