Clearlake CV…..Again
Is it just me or does it feel like Clearlake announces a new single asset continuation fund? They acquired Constant Contact with Siris (another dumpster fire) in 2021 and just announced are now putting that into a continuation fund as well. Has anyone seen the assets they’ve been bringing to market and can comment on quality?
Funny how CVs were first brought to market as PE firms didn’t want to sell their best assets too early but still provide liquidity for their LPs. Now they are used to reap more fees, pay their counterparties at banks, artificially deploy capital in new funds, etc. Talk about the moral hazards that come with transactions like these
Classic high finance of abusing something that has a valid use case to benefit themselves. IMO firms like ICG who take the other side of many of these transactions are going to have a very hard time and people will realize these are just shitty co-investment funds.
Imagine investing as a LP into a single asset CV focused fund. You get 10-15 portfolio companies. And for that, you pay 0.5% - 1% management fee and 20% carry to the underlying sponsor assuming things go well. And then on top of that, you pay 1.5% management fees and 15% - 20% carry to the CV sponsor. This is not even taking into account further expenses that will be charged by both the underlying sponsor and the CV sponsor. After all this, these CV funds are marketing 20% net IRR and 2x net MOIC to their LPs. Color me skeptical!
Agreed. CVs and NAV loans getting absolutely abused this year. Anything to generate DPI at any cost I guess…
Agree the Clearlake (and other funds) have abused CVs for their own benefit, but wonder if in this situation it’s related to needing to buy out Siris’ stake as that fund winds down / liquidates, which seems like a more legitimate use
Is the Siris wind-down for sure happening? I keep seeing it quoted here but never saw a source. They haven't done a new investment in forever yet they just signed a new lease in New York... hard to interpret.
I have no clue, just heard rumors of it and saw limited new deal activity as well
Don’t think there’s any truth to that - they just bought two assets from Bertram and Elliot
Symplr - marked at 1.1x after 3 years and should probably be a 0.8x given fundamentals have deteriorated.
New fund's fundraising is going poorly to say the least, lol
these vehicles are good way to maintain flexibility for certain LPs and a smart asset class to allow some other investors to participant in the upside. Smart structuring move, why the hate/jealousy?
They have all performed poorly and were done at ridiculous valuations.
*Clearlakes haven't. There's already been a few studies showing CVs have performed on par with typical buyout returns with lower standard deviation. Albeit, performance is still early.
Wtf are you talking about. There have been hardly any realizations. Most CVs underwrite to ~4 year durations and not that many of them have been chrystalized within that period. Of the ones from 2018 onwards, only a fraction are fully realized.
Found the junior banker who helped sell all these shitty CVs in 2021/2022
Fake it till you don't make it.
Does anyone know what mark the CV bought it at? The CV investors probably aren’t dumb and have paid a discount for it, or reduced fees to Clearlake
One of Clearlake’s CV WheelPros hasn’t been doing well - looks like they missed an interest payment
https://www.bloomberg.com/news/articles/2024-07-29/clearlake-backed-whe…
seems like gps are getting a lot more pushback from LPs on CVs
https://finance.yahoo.com/news/private-equity-gets-creative-buy-1015010…
This article seems so skewed and misinformed to me.
First of all, an asset the manager couldn’t sell “for a profit” would not be rolled into a CV… that would imply they took it to market and bids came back at less than a 1.0x MOIC. 1. That asset probably hasn’t returned a strong enough return in the first place to be rolled into a CV and 2. Secondary investors aren’t going to back an asset if other people aren’t willing to buy it. If no one else will… why would they? The secondary fund is just gonna come in at the price they received bids at and yes they’ll ask to see the bids.
Second, CVs are down from 2021 because secondary investors invested a shit ton in them and got over concentrated. That, combined with LP portfolios selling for very attractive discounts made CVs less interesting cuz most CVs get done with +/- 10% of NAV. There also just wasn’t enough capital to complete these deals. All of this has flipped back the other way and 2024 is shaping up to be a record year on both halves of the market.
Yes, LPs push back when GPs try to get greedy but that’s not at all why CVs are down from 2021… not even gonna get into the comparison to 2018 cuz it makes zero sense. The days of the 2021 deals are most certainly gone but CVs are definitely here to stay. They serve a very specific purpose and managers can realistically only do them 1 maybe 2 times per fund before LPs will push back. The sophistication of secondary investors has also increased significantly with many of GP-led teams being comprised of former direct investors. And LPs (if you read any of the investor surveys) are starting to accept CVs place in private markets and are beginning to change investment policies so they can more easily roll into CVs as they have seen the value they lost out on by cashing out. CVs are also becoming much more LP friendly after the ILPA’s guidance… author conveniently left out the rise in status quo options.
People used to baulk at CVs as zombie funds, now people baulk at GPs that do multiple. Eventually that criticism will fall away too. Sponsors buy assets from other sponsors and still make fantastic returns all the time… so why is it so hard for people to fathom that these vehicles produce strong returns too?
Obviously some will perform but there’s an abundantly clear conflict of interest, especially now that it’s hard to generate liquidity from normal exits. Trying to exit now will fetch you returns people can’t stomach and hence they pull auctions as we’ve seen. So the move is to sell to yourself supported by a much less diligence prone audience.
Hey brother, how's that WheelPros (or should I say Hoonigan)-flavored foot taste in your mouth?
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Guys, WheelPros is like a 0.7x TVPI right now. Clearlake move all their shit into these CVs.
Looks like Wheelpros just filed for bankruptcy...wiped out all the CV investors' equity. will be interesting if this changes appetite for clearlake CVs
Watch ICG like a hawk (single-asset GP led fund), they've gobbled up a bunch of these from Clearlake and other sponsors everyone is running from. They brag about being in the biggest CVs but they're all going to be straight turds.
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