Most contrarian view in PE going into ‘25?
What’s your one industry related idea / view that people disagree with you most on, but that is right?
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that pe is still a great industry and returns will be the same as they have been over the last 10 years
(just kidding...lmao, even a contrarian won't believe this rubbish)
The long-waited deal tsunami will hit La Inboxe in April of ‘25
Tech M&A will not happen.
There will be a massive oversupply of data centers starting in late '26 and the current vintage of real estate and digital infrastructure funds (i.e., those deploying capital into the sector in '24 / '25) will have a rude awakening.
Those already invested by '23 made a ton of money, but that gold rush is over and everyone coming in today is buying at the top.
Healthcare roll-ups are done. Maybe roll-ups in general are done. Healthcare, car washes, HVAC - you name it, blood everywhere.
Probably for the best for patients that roll ups are not working out. Likely we'll see de-consolidation over the next few years as docs roll off ramshackle PPM platforms with zero integration...
I've thought this for 18-24 months now and it's slowly unravelling. The medical ones will be first for a million reasons as it affects real people (patients) versus just a services based business. There's numerous funds who have built their entire firm on the back of these roll-ups and arguably the most successful firm has two donuts in their latest matureish fund but haven't told/marked them down to date. Unless you are at the ground floor of a roll-up they make little to no sense economically if the idea is to just flip it in 5 years. I think the players who can still make these work at IS managers who have smart LPs (namely patient FO's) who are fine owning a business for 10 years with a smart strategic plan versus just mashing shit together and praying some $5b fund buys it from them.
I still don't really understand the idea that PE can really shrink. If GDP is growing, so should companies. Understand interest rates go up, valuations go down but public markets don't seem impacted and with private equity, GPs are incentivized to deploy if they can get returns above their hurdle rates (hurdle rates are only 8% anyway...). Like what is the worst case view for a 10+ year view? There is still a boat load of dry powder
That many funds have had their last fundraise and they are yet to know it. Lucky ones will be bought out in consolidation plays.
Why would someone buy a Zombie fund? Blackstone doesn't need to buy a MM or LMM sponsor
I think those are "lucky" because BX et al buying them don't realize they are zombie funds. Maybe sector specialists with decent prior performance that raised an outsized proportion of current AUM in '19-'21 and have a 10 year tail of slowly dwindling performance?
My thought is many older firms (think pre 2000 founding) know this deep down and the senior partners are 60-70 years old and are worth $100mm+ so they really don't care and will just wind down the firms. PE is so much more mature where grinding a 2x net return on a fund is so much more difficult than it was 25 years ago when these guys started their firms. I've had numerous conversations with new funds even where the MP's are 40-45 and literally said we are going to probably do 3 funds, retire at 60-65 and just wind the firms down unless junior talent wants to buy them out. The thought is if they have good returns they'll still make their nut and not have to deal with the nonsense of continuous fundraising/managing a firm and have no desire to just sell out to a GP stakes firm that will force them to fundraise way too hard or create pointless strategies.
ITT: borderline consensus views
The best returns will be in incumbent legacy businesses that are completely underdeveloped and completely sheltered/isolated from recent tech and AI advancements. This will cause a mad dash of these assets by PE in the second half of 2025.
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