Investcorp takes minority stakes in Banner Ridge
Any thoughts? What's Banner Ridge reputation in the market?
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Rough elbows but probably the smartest group on the street. You don't generate 35% net IRRs without fcking some people over.
How do these investments work for investcorp and banner ridge?
Investcorp takes a minority stake in the management company of Banner Ridge and the proceeds can typically be used in two ways, secondary (cashing out partners) and primary (used to make GP commits / establish new product lines / other investments to help grow the fund). Obviously a GP stake investor would want the majority of their proceeds going towards primary. These funds typically pitch themselves to GPs as also bringing strategic value in the form of fundraising resources, research resources, etc. In exchange, Investcorp gets a cut of Banner Ridge’s management fees and carried interest.
Quirk to these transactions is unless Banner Ridge were to IPO, sell to a larger asset manager or another investor buys their stake then Investcorps money is basically locked up. Hence why GP Stakes funds are mostly evergreen funds. Of course they’ll be receiving cash flows from the management company so it’s somewhat of a yield play given how rare the aforementioned transactions are (GP stake investors correct me if I’m wrong). Typical strategy is find a manager that can continue to grow AUM and therefore fees.
Echo above poster on how GP stakes work. From an LP perspective I don't love seeing firm after firm going the GP Stakes route to cash themselves out or expand products outside their core competency. There's becoming more and more evidence (still early) that these firms performance fall off in subsequent funds. Probably a bunch of driving factors but seeing an MP cash out $100mm+ (no clue in this instance but it's a shit ton of $, more than they've ever had) gives me the vibe they're content drifting as they've hit their grand slam and everything is gravy now no matter if true or not.
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