Fund blew up. Now what?
Hey everybody,
Second year associate at a first time fund. We had good returns, but for reasons I won’t go into here, I walked in today and was told the fund is shutting down and that the entire team would eventually be let go.
I probably have a few months maybe to find a new job before being formally fired, but the situation is still developing so TBD.
I did banking at a top boutique, twoish+ years in PE.
It all still feels kind of surreal. Not really sure what to do next.
any advice? Anybody else been through this?
Becoming much more common this year and last year with funds blowing up / winding down cause they can’t raise…
Just have to put your head down and start recruiting…
First of all, sorry to hear that. Never an easy situation to handle.
For what it's worth, there are plenty of funds struggling, including mine. Difficult fundraising and few PortCos going in the wrong direction and you have the perfect combination for a storm. We had to let go about 10 people (out of ~60) and a few more have recently resigned. I can guarantee you, it's not pretty out there and in my view the LMM/MM is the most affected.
Appreciate it is difficult to see the brightside but they warned you and that is a big plus. It even sounds like they are giving you few months in order to wind down before letting everybody go and you should definitely capitalise on this. Do the bare minimum and spend your days networking, contacting people, liaising with headhunters.
Good luck out there. In similar position - or expect to be soon.
Was planned to kick off raise of fund III but now delayed for 12 months due to environment, limited exits and a few struggling portcos (after initial feedback from market). The challenge is that in 12 months, I suspect it will look worse (as some issues are somewhat covered up at the moment).
Out of curiosity, what are some of the the reasons funds can’t raise money, even they had good returns, and have to wind down. Do existing LPs just not commit new capital even the return is good?
Large LPs have received little to zero distributions the last 2 years from their private portfolios. Marking things up and having good paper returns means nothing if you haven't sent money back to LPs.
I'm sorry to hear what you are going through.
My fund (and my country) is having similar issues. We invested in a lot of businesses for ultra "deep value" pricing - this means the returns are great on paper but there is no liquidity for the next 2 years. LPs want DPI and there is no way to get them cash without either levering up at the portco level and doing a dividend recap (which they don't want) or taking a NAV Loan (which they don't want) - they want us to sell the businesses now and there just isn't a market at this moment unless we take a write down on multiple. Our fund is probably "top quartile" but it doesn't mean anything if you can't convert unrealized to realized within a decent amount of time.
We have been trying to fundraise for the next fund and we are getting frankly insulting requests from LPs like if we can use a hard hurdle or raise our preferred return - one brainiac even asked that our new fund be open-ended, despite all the assets being completely illiquid special sits lol.
Tough environment. Those with good wealth/retail distribution channels already in place will survive, the rest of us are fighting.
The bolded section is what will ultimately drive a lot of $ (HNW/small E&F) out of PE for a long time and it's probably a good thing for everyone. Too many funds exist for how many good deals exist and the 2018-2021 period of ridiculous DPI fooled many into thinking this was some new norm.
feel free to dm me, my fund is shutting down (they havent told us but im p sure). were also a new fund but just havent been able to raise
i got a part time job to prepare and am actively interviewing
what kind of part time job?
feel free to dm and i can share more!
Mind PMing details? I think I know the group
would love to hear more if you're willing to share. we track first-time funds.
i have so much to share lol
Free money is gone. Sure the megafunds will still raise (at least close to their current size), but the emerging managers will be subject to deeper diligence and proven ability to create DPI. So many funds have raised on paper returns from 2018-2022.
I am actually surprised with how much some GPs have been able to raise despite portfolio issues.
Where do the seniors go in a situation like this?
Spin out or stay behind to manage out the portfolio and wind down
Keep collecting management fees on the old funds, vest carry. Once that’s done, not much.
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