Time to fess up - valuations
Right time to fess up. No need to hold up appearances or justify your bizarre working hours for the carry unicorn. How absolutely blasted is your fund if you actually were to mark to market? How far did the partners stick their nose in trough during COVID? Who else is managing 10 year old funds with the only people having meaningful carry in them all near retired so you’ll be clearing out their shit for the next decade for no pay? Come here to commiserate or brag out of delusion - everyone welcome
(Genuinely curious, what’s the state of the nation? We’re sitting on some old assets which will be very hard to get out of at book value and we deployed a serious amount during COVID which is going to be painful to admit was probably not a good idea and almost certainly marked too high. We should hit carry as we didn’t go too far overboard but feels like it’ll be a very long road or at lower MOIC. Anything we recently tried to sell has been tough.)
We got a turd in the punch bowl
Icing on the cake? A lot of PortCo's struggle to carry > 5.5x Leverage at these rates, esp. true if the business has a decent amount of capex. Negative "true" cash flow. I'd imagine there's a lot of pain out there rn in the MM/LMM sub $50MM EBITDA land with direct lender debt priced at S+550+...
Seeing a good amount of weakness in 2H'23 reporting with cracks starting to form
3 funds, probably none have promote… heading for the door
PE or RE!?
Have carry in 2 funds - B/C.
Remaining deals in Fund A are fucked and we are sitting on couple investments where we'll barely make our money back, luckily for the platform/partners most of it returned and so even with the duds it's 2.2-2.3x
Fund B is ok honestly would be a dud but we had a 6x realized deal on a decent check that's flattering everything. I have some carry in this. Underwriting 1.8x. Just hit carry so should see some small $ in next 12 mo.
Fund C in which I have most of my carry is doing well actually. Underwriting 2.2-2.3 but can be higher. Won't see $$ for 3 years.
All in all got super lucky.
Following
What you have written could genuinely 100% have been my fund. At least I am an ASO and so I don't have carry, but the comment about selling 10 year old portcos with no one at the firm having economics or giving a fuck about them is so true.
Family office, not fund, but maybe similar issues. Main issue is passing on dividend recap opportunities over the last couple years to instead re-frame two portco's as M&A "platforms". And under that delusional re-framing, did several overpriced bolt-ons that are now sinking the ship. Will make it through, but going to turn a couple 3x's into 1x's. Of course, without a mark to show people how much damage they've done, there are several decisionmakers who would strongly disagree with my description even though any neutral person with open eyes would immediately call it the shitshow that it is.
How many people are secretly giving keys back? In RE but evaluating deal with low credit tenant PE portco (prominent/desirable WSO PE firm) now under control by private credit lender. You google the transaction and you can find tons of headlines on original PE firm acquisition, zero on giving keys back…
Honestly I think a lot of this has blown over. My fund is pretty aggressive about marking down but pretty conservative about marking up. We’re gonna hit low 2’s overall, have a couple zeroes but also some wildly successful exits already banked. Our holds are going to have absolutely ass IRRs: not sexy enough to IPO, buyer universe not compelling enough to sell to the next guy yet. But solid MoM marks both now and expected.
Industry-wide I think the funds that were going to struggle fundraising or eat fund size losses because of this issue have pretty much already done so. But I remember when people were like “omg, tech is OVER” a year ago but now people are still hot for TB/Vista/SL seats like almost nothing has changed. Not to say we’re in a ZIRPy bubble or anything but I feel like there’s been a bit of a cull and equilibrium.
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