Berkshire 2024 update / comp, culture, performance
Anyone have an updated view on Berkshire’s performance / comp / culture at an analyst level? Mostly interested in the tech or healthcare verticals but curious if that matters since Berkshire’s generalist
Their real estate lending platform MF1 is quite interesting
Following. I can answer some though. Performance has been poor (see fundraising miss), but maybe they have turned it around. They are no longer generalist so sector likely matters a lot. Culture is good, but caliber of talent has been on the decline.
What’s their comp?
190k base
First year comp is ~340k, with option to co-invest
Their performance blip is no longer a blip and their “managed” fundraising trajectory seems not as voluntary as it did historically.
A lovely place to work by all accounts and really does have the magic touch when it comes to b-school placement. A far more compelling place to be an ASO than a VP. Of course, recruiting to leave post-MBA is fraught (especially now and the last 1-2 graduating classes) so prospects are gonna weigh that factor differently depending on how much they’re up for it.
Do you have any insight into what has caused their poor performance?
Can you expand on the performance part? Know Pitchbook not always perfectly reliable but their latest fund currently labeled as top quartile... it's a '21 vintage so maybe some of the early deals in that fund were bought at frothy prices, and not fully deployed so know there's a lot left to be determined, but curious what else makes you say bigger than a blip
A 2021 vintage is beyond meaningless. not only because deployment was 40% as of 6/30/23 (Calpers data), but only about 4% of *that* capital had been returned.
AFAIK their 2016 fund was fourth quartile and may have edged up into third. That one was only about 20% larger than their 2011 fund.
Any way you slice it they've totally crawled in fund growth trajectory since hitting the $3/4bn mark compared to peers, and their fundraising is just not as frequent as those competitors. It's totally fine not to grow like a weed if you think going too fast will turn you into the Providence horror story, but if you're going to be that deliberate you just *have* to deliver on returns every fund, and it hasn't happened.
Yeah, Pitchbook has the 2016 listed as third quartile, but regardless agree it looks less than excellent. My question was more if you had other insights, given both sources can be outdated / inaccurate. For instance, just checked the fund I work for - know for a fact our current remaining capital is lower and DPI is higher than what's shown publicly (looks to be about 2-3 quarters stale).
I disagree with your statement that 2021 vintages are irrelevant or that not having significant cash out means a young vintage's early marks are worthless. As I said in my original comment, I do agree it's still early in that fund's life and lots is TBD, but do still think it's super relevant. For one, many funds are active prior to final close - no clue if that's true for them, but you can oftentimes add another ~12 months of activity given the gaps between first and final closing. Two, most funds are being extremely conservative in paper marks right now given the broader valuation reset of the last ~18 months; internal valuations haven't been more scrutinized since '09/'10 (with the exception maybe of Q2'20). And three, assuming 4-5 year fund cycles, +/-3 years post fund closing is typically when you start pre-marketing your next fund - this means while your Y-1 vintage matters a ton (i.e., your most recent mature fund at that point), your current Y (i.e., active vintage) is still a really important indicator for LPs (e.g., is your strategy working, any early flops, are you on pace for expected deployment, is your senior deal staff spread too thin, etc.).
I don't have a horse in this race and don't care to start an internet argument, but just saying I think it might be slightly early to put the nail in the coffin. Think it's probably only truly determinable once we see how their next fundraise goes - if they can close a reasonable upsize on their 2021 vintage sometime this year or next, that's probably an indicator performance still fine broadly speaking (even if definitely down from their peak); if they're flat or only a couple percent higher than their current $5.8B then agree that would then feel bigger than a blip.
I think a lot of this comment is a counterpoint to something I'm not saying. A 1.1x on a 2-year old fund (which is what they have on Calpers, idk where the first quartile comes from. 16% net irr on that 1.1x so maybe the first exit was great / there’s some fund line juicing going on that skews it?) that's barely deployed is not a warning sign or a nail in the coffin for me--it's just not meaningful. I don't think 1.1x (I don't even know if Calpers uses LP marks or exits for this anyway) is a bad thing right now because, as you said, most funds have conservative marks rn. My old shop used to mark literally everything at 1x unless there was a significant business catalyst to get it to ~2x or higher, and that was pre-pandemic.
I think early marks are basically a one-way ratchet: a fund that has amazing marks or significant exits 2 years in is probably going to be a banner fund, but one that has little capital returned and a just-above-1x mark has just as good a chance at being a very solid 2-3x fund as when it first closed.
I disagree that peers are normally fundraising every 5 years at the same-ish size or that we have to hold off to judge how Berkshire is performing right now. Maybe they turn it around and do great, and as you said, maybe this 2021 vintage already has a ton of winners. At the end of the day, their fund trajectory right now just doesn't compare to other leaders in its ballpark. Look at these peers, rounded, since 2011:
KPS: $3.5B (2014) -> $6B (2018) -> $8B (2023)
NMC: $4B (2014) -> $6B (2017) -> $9.5B (2020)
Jordan: $3B (2013) -> $3.5B (2018) -> $5B (2021) -> $7B (2024)
TSG: $1.5B (2012) -> $2.5B (2016) -> $4B (2019) -> $6B (2023)
I'm sure there's plenty of other stark examples but at the end of the day, if I were trying to project out long-term DAW or even durability of investing style, I would look to fund size momentum and time in between raises pretty closely. It's one thing to be a "patient" fundraiser and deployer, that's totally fine! But you've gotta be generating a consistent returns profile that matches that approach if you want to maintain, let alone grow, your capital base. I think that's a fairly uncontroversial proposition.
Is culture good anymore or has that also taken a dip with performance?
U seem like a culture carrier
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