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Dude KKR is a clown show, they lost nearly 6 billion on their investment in Envision in basically 3 years, an impressive ability to screw up.

Blackstone don’t even get me started, they way overpaid for everything at the top of the cycle. They bought peak EBITDA (insanely adjusted) housing distributor ILG at 12x, I wouldn’t be shocked if they get wiped on that too.

Zero specialization or skill from either firms who deployed and fundraised on brand name alone, returns will awful this and prior vintage

 

Carlyle (leadership issues, lost some partners, anecdotally heard poor culture) 

Some of the tech focused funds, it is hard to figure out who right now but 1-2 could face the same issues Warburg/Bain faced post 08 where they didn't raise a similar sized fund for at least a decade 

In the last cycle you "won" mostly by being overweight tech but now that everyone has built out their TMT capabilities I think the next set of firms on upward trajectories will be different than the last five years.

Personally bullish on BX/KKR who have fairly differentiated portfolio operations capabilities and differentiated fundraising platforms (some of the only firms with long term core funds, more international LP base, both the first to target retail/HNW money) 

What a completely stupid 1st order thinker comment.

Just about every major fund hit an all time high in their pre-GFC era fund. Has nothing to do with trajectory of the PE firm, has everything to do with where we were in the cycle and how over their skis LP’s were getting on PE portfolio allocations.

 

They were very aggressive over the past decade and were able to produce some eye-popping returns. And their funds were deployed very fast and grew larger and larger. However, their portfolio is now starting to hit significant hurdles. Just look at the yields on the junior debt of their portcos. There are several deals that will likely result in zeroes for Clearlake.

 

Bearish on Insight, at least their latest fund. They deployed almost everything at the peak of the market in tech and paid (per an LP friend) a MEDIAN of 37x current ARR. They've gotten too far away from their bread and butter... now just overcapitalizing a bunch of super early stage stuff. 

Advent also went all-in on tech at very high prices during the exact worst point in the cycle, but they have a sidecar vehicle to keep the main fund from being overexposed. Don't have visibility on their other verticals. 

 

Insight also has moved way away from their DNA (early stage and growth minority deals) into LBOs because it’s easier to deploy huge checks that way. Will be interesting to see how the current vintage pans out

 

While I do agree that firm's like Insight/Vista that paid high prices during the last cycle might have tough returns for the current vintage, I do think there is something to be said for investing through the down cycle with reset valuations. Those funds should do well, IMO. So I think the demise of these firms, that have been doing tech for ages, is a bit overstated.

 

It's interesting that the popularity of a firm on WSO is kind of an indicator we're near the top of a cycle for that strategy. Search Insight or Tiger on these forums and you find many threads the past couple years of folks desperate to work there.

It's similar to the oft-repeated point about MBA career choices being a leading indicator of an upcoming bubble crashing (e.g., bankers in '06, tech PM in '20-'21).

 

They have also barely returned capital to their LPs while fundraising like there is no tomorrow. A lot of their marks are hypothetical. For example, their 2014 fund only has 99% DPI but a whopping 277% RVPI. And somehow they’ve raised 3 funds since 2017 and raising a fourth. This while the only DPI to show for is 30% in their 2017 fund (which by the way is also marked at 2.9x net…) and zero in the others

 

On the MF side, consistently hearing from people in the industry that Bain Capital, and TPG to a lesser extent, have also fallen quite far from grace. ​​​​Agree with the comment that Insight is the real sleeping giant about to fall though.

Edit in response to the comments and MS I'm getting: It looks like I was wrong on TPG. I had only heard that about the Rise Fund. Dumb of me to extrapolate that across the whole firm. 

 

On the MF side, consistently hearing from people in the industry that Bain Capital, and TPG to a lesser extent, have also fallen quite far from grace. 

Aren't you the A2 who admitted to being rejected from both? Lol

 

Might get MS for this, but I think Vista. Vista has been hiding a few bad deals, e.g. Solera, and seems to be struggling to raise their latest fund. 

They announced they were raising their newest fund between Q3 and Q4 and it still has yet to close. LPs seem to be staying away from Vista since they can get the same industry exposure from almost every PE firm now a days and Robert Smith's reputational risk.

Also, Vista's narrowness/lack of expansion with their strategy may cause them to overpay for certain deals since they essentially restrict themselves to US-based majority buyouts, when all over their competitors have PortCo's and offices internationally and their competitors are also raising growth funds, which mean they will lag in AUM growth.

They are extremely smart investors and good at what they do, but I don't see how they have an edge anymore

 

I don’t disagree with this one. It’s really freaking hard to deploy $10B into a single vertical (enterprise SaaS) in a single geography, especially when you have a specific company profile you target (Vista is very “playbook” heavy, which means they’ve very focused on certain business profiles). Broader SaaS interest has made these high quality software businesses very expensive, and now Vista has resorted to paying up massively to be able to keep winning auctions.

+1 on them hiding some duds as well, they’re very proud of the “never had a down investment” but eventually they’ll have to pay the Piper on a few deals.

I don’t think they’re going away and obviously great investors, just think the days of endless fund growth and phenomenal returns are probably behind them. It was easy to be a great software investor when only a few funds were doing it at that scale but it’s a whole lot harder now

 
pe255883

I don't disagree with this one. It's really freaking hard to deploy $10B into a single vertical (enterprise SaaS) in a single geography, especially when you have a specific company profile you target (Vista is very "playbook" heavy, which means they've very focused on certain business profiles). Broader SaaS interest has made these high quality software businesses very expensive, and now Vista has resorted to paying up massively to be able to keep winning auctions.

+1 on them hiding some duds as well, they're very proud of the "never had a down investment" but eventually they'll have to pay the Piper on a few deals.

I don't think they're going away and obviously great investors, just think the days of endless fund growth and phenomenal returns are probably behind them. It was easy to be a great software investor when only a few funds were doing it at that scale but it's a whole lot harder now

1- every PE firm is “playbook heavy”

2- if it’s so hard to deploy billions of dollars into saas, how is TB doing at 2-3x that clip?

 

This has been mentioned a number of times recently, what’s the reason? The metrics from outside in look good (flagship fund VIII and growth fund 2 were both way bigger than the previous iterations, Funds V and VI were marked at 24% net IRR, VII was raised right before COVID and deployed during COVID so too early to say, unless there’s bad deals that people know about that aren’t reflected in the marks?)

 

Probably more MM than UMM but Sycamore was hit by some pretty high profile departures and probably isn’t somewhere I’d go

 

Absolutely shocked HIG hasn't been mentioned! 

They haven't done any bad investments, as of lately. They haven't done any investments, really... and they'll pay back all of the undeployed capital back to the LPs by 4Q22. Likely the first large fund to see substantial headcount. I expect carnage!

Source: Trust me bro. 

I don't know... Yeah. Almost definitely yes.
 

https://www.wallstreetoasis.com/forum/private-equity/how-much-of-pe-is-…
 

Lol this reminds me of the thread (from nearly a year ago - ironically right at the market peak!) where OP was asking if PE had become a game of musical chairs for many firms.

As my comment then said, a lot of guys I know at MFs have done really well over the last few years by overpaying (beyond top-dollar) for assets… only to sell them for an even higher price 1-2yrs later due to the buoyant market. All those guys looked like geniuses at the time… and now will have to face reality I guess.

Having said that, it’s hard to judge as the problem with the last decade is that anyone who didn’t pay top-dollar for assets and stood with cash on the sidelines, got unfairly judged as “an idiot.” So many PE investors likely had no realistic alternative but to pay prices they thought were overinflated and rely on the greater fool theory. Unfortunately the music has come to an end (for now) on this game of musical chairs.

 

Surprised no one posted about Siris. Returns are abysmal.

 

Eh, it’s one thing to argue Clearlake’s performance is unsustainable and they’ve utilized some questionable strategies that will probably blow up going forward (and I’d certainly agree there), but kind of hard to say they’re currently “on the way down”.

Their performance the last few years has been absolutely insane (heard something like 40-50% IRRs) and the fundraising speaks for itself. So ya they do some funky stuff and I wouldn’t put my money in a Clearlake fund right now, but hard to argue their declining based on current results

 

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