Permanent Equity
I've seen more and more micro firms turn to this instead of the classic PE flip in 5-7 yrs model.
Anyone do this type of investing either solo or in a group? How are returns as compared to the traditional PE structure?
I had this discussion with my cofounder a few months ago. Here is my word vomit take...
Neither of us personally see the point in selling assets unless we're offered a price far above market because debt is so cheap right now. Look at the delta between selling a portfolio company and a dividend recap...usually not worth selling if CAGR is good plus finding great places to park money is very hard right now. There are very few good deals floating around and given our focus on turnarounds, cash isn't really a problem as the assets we usually look at are relatively cheap b/c they are distressed.
The other point that's probably more applicable in traditional PE is that you end up doing a lot of objectively stupid shit to make fundraising easier. For example, selling a position early so you can post attractive IRR means changing the business you're invested in to focus on short term wins near the end of the fund's life.
Some cool dynamics with an evergreen/permanent fund too...
For example you can lever the portfolio to acquire new assets or provide portfolio companies with capital for growth. This obv means a much better interest rate as DSR looks way way way better.
So my question is this then. In a forever hold type of situation, are you basically paying investors a dividend?
Dolore id cumque fugit et quia necessitatibus. Ad ab nihil nihil molestiae aliquid ullam pariatur. Illo et sit explicabo ipsum et. Repudiandae qui nihil cumque omnis quis itaque sit.
Quia velit repellat quam ipsum reiciendis sapiente. Dolorum voluptatem architecto incidunt minus velit quisquam nihil. Consequuntur eligendi ut neque.
Qui dolor magnam laudantium perferendis porro et. Voluptatem deleniti commodi ipsam voluptatibus rem ut nisi. Et officia maxime et aspernatur officiis enim exercitationem. Cupiditate rem aut fugit ea quaerat voluptatibus est. Repudiandae cupiditate recusandae cum veniam aut a optio. Voluptatem omnis dicta nesciunt voluptatem.
Tenetur fuga nostrum repudiandae aspernatur omnis quia id. Voluptatem sit esse dolorem sit qui modi voluptates.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...