Committing to CD&R?
I am working as a LPs and the portfolio is top heavy and moving more to MM managers. We have never invested with CD&R before and am wondering if that is even a good idea. Clearly CD&R has generated strong returns with a bit high volatility (i.e. losses). Fund XI is a $15.6bn Covid Fund (2020 vintage) and struggling. Fund XII is a $25bn Fund (2023 vintage) which is going well but still unproven. The question is that CD&R Fund XIII is a $26bn Fund while successful track record only goes back to $10bn Fund size. Can XIII be a net 2x/20% Fund (I can take a Fund net +2.0x but 18% IRR but 2/20% more ideal)? Just curious what people's thoughts are.
did cd&r write this
Ahahahah
CCCs, Defaults, & Restructurings
CD&R will be grouped with Clearlake and Platinum soon...from RX banker
How much money you got? I can give you 2.5x net with my fund easy. Raises next summer
ain't no way this dude is making the decision on LP allocations based on anon inputs from wso
Still a good option if you need MF exposure. They’ll likely get you a 2x but prob not 20% net. Not a knock on them it’s just very hard to do on a 26b+ fund without lucking into an extremely favorable exit environment in 5 years which is out of their control.
Fund XI will probably recover cost+ on the currently underperforming deals and be a ~2x over a longer hold for a low teens irr. Certainly not great but shouldn’t scare you away if you need to deploy.
They’ll be in market for a while so could just wait until 2027 when some of the other top performing large/mega funds are back in market and just compare directly.
Fund XI is sitting at 4% net IRR 5 years in as per CALPERS, there is no recovery from that usually, base case is they will end up below hurdle and won't pay carry on that one.
You are right the performance I was looking at was outdated. They’ll be lucky to hit the hurdle for Fund XI.
Nonetheless would still bucket them as safe pair of hands if you want MF exposure.
With no incentive to deploy right now tho I would probably just wait until 2027 to make a decision.
There's only a few select MF PEs who can fundraise based off track record; CVC, EQT, Advent - CD&R is also there or there about. The other MFs can still hard close at similar-sized fundraises with 2nd/3rd quartile track records given their institutional strength and quality of relationships - is co-invest a big thing for you as an LP or is that not a priority? I think LPs are a lot more understanding of 2020/21 vintages, paying crazy multiples in summer 2021 and now realising your portfolio is marked at 0.7x isn't seeming to be just an idiosyncratic issue.
I think it’s obvious at this point that the Nate Sleeper Era at CD&R is just a very different philosophy than the PE pioneer that used to boast about how it had “zero zeroes” for approximately 35 years or whenever David’s Bridal went bust. The current firm puts a LOT of effort into deployment and collecting the “2” at the expense of the “20,” which as others have mentioned is a real boon for certain kinds of LPs at a megafund level of deployment. The internal hurdle dropping from 2.5x+ deals to something more like an 18% 5-year forecast once you adjust everything is a real culture change, and naturally when you do the latter you’re going to bust out on more deals because you overshoot from the start, get clipped by SaaSpocalypse, have the industrial bread and butter “ugly” deals that Sleeper’s DNA (and many partner elevations) loves fail at once in inflationary environments like 2022, etc.
Is their industrial portfolio in bad shape? Does that affect Sleeper or the other industrial partners?
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