Consumer/industrials va tech PE?
I have an offer to join either a Consumer & Industrials or a Tech PE fund. In my view, there aren't significant differences between the two funds themselves. Looking at the medium to long term, which would you choose? I'm leaning toward Tech because the sector seems more attractive, although I don't have a strong personal preference. I just want to make sure I'm choosing the right sector.
Consumer PE is dead
Agree with first response, there is major difference between true consumer and the more classic industrials/services/‘real business’ PE. The former is very challenged a as a broader theme (unless you have an angle like a Sycamore/Roark). The latter is much more durable and IMO will always be around (it’s the clasic “widget manufacturer in arkansas” type thing)
So in your comparison to tech, I think whether it’s more consumer vs industrials matters
Do you like money?
Tech is almost always going to be a safer pick vs consumer/industrials without more context of each of the underlying funds. The tech industry has grown much quicker than consumer or industrials and any fund that we've seen in the past decade who has scaled AUM quickly were tech funds (Thoma Bravo, Vista Equity).
Other consideration is it's probably easier to pivot from a tech PE fund to a consumer or industrials fund one day but it's hard to do the reverse. Consumer and industrial businesses are relatively simplier when it comes to business models and mostly everyone talks in cash EBITDA. Tech is a different beast since there are plenty of other metrics to consider and valuation is different. I think the skillset you get from tech investing will be more beneficial long-term and if you decide to go into industrials one day it'll be quite easy to learn the simpler metrics and valuations.
When I think about the biggest themes today and in the future, it seems like the future for industrials is very bright (data centers, space, alternative energy like nuclear, hydrogen). Developments in those sectors have the potential to change the foundations for the way we live. I'm not really sure what in the technology sector has that type of potential. All the Vista and Thoma portfolio companies are just software businesses.
I'd consider many of those themes that you mentioned to be infrastructure and energy transition strategies and not general industrials. Most of these industrials PE firms do not invest in these areas and I don't think they would be able to with how their mandate is set. I think of industrials PE as touching basic industrials like manufacturing, distribution, and business services to name a few.
I agree infrastructure / data centers will be huge over the next decade but there are dedicated infrastructure funds out there and they are typically separate from general PE since they underwrite at single-digit / low double-digit returns and the diligence is much different. The metrics and valuation are very different compared to regular way cash generating businesses. Energy transition strategies are going to also fall into this bucket of being separate and different.
Easy choice Tech > Consumer that’s it
I would lean into tech
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