H&F Fund VIII (2016) = DPI: 0.65x, TVPI: 1.76x (4th Quartile, Bottom)
H&F Fund IX (2019): DPI = 0.11x, TVPI = 1.56x (4th Quartile, Bottom)
H&F Fund X (2021: DPI = 0.14x, TVPI = 1.21x (3rd Quartile)
Everyone I speak to states H&F as THE best investors in the market, but looks like their returns have been weak the last 9/10 years, what's going on?
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Uhh did you hear of the tech pullback…?
They got cooked. To be honest, they will all still get mind boggling rich from the management fees alone and the earlier funds were home runs so don’t feel bad for them
bump
Why did you bump this, 16 minutes after the comment above yours?
16 minutes may as well be an eternity to kids with tik-tok scrambled brains.
Lol this forum doesnt care about actual performance, please refer to OFFICIAL MF/UMM PE PRESTIGE RANKINGS post for the only relevant metric, “prestige”
A firm that over indexed to tech had a few below average funds….. what is hard to understand here?
Hire only 3.9+ Ivy kids from a select few “top” banks with a few MBB sprinkled in and pay em 400k and you too can be the “best investor” by the metrics on these forums.
It is actually interesting, you see this in banking , consulting recruiting, etc, all of these places are kind of a talent pyramid scheme where recruiting a certain profile makes the place more attractive to people of that profile
Yes obviously. The currency of this industry is inspiring confidence. There are many ways to do this but one very good way is to plaster some Harvard logos everywhere.
Only differentiated product in alts these days imo is the MMHFs like M/C which seem to basically fire people to manage to a 10% return every year.
From their public pension fund presentations (use Google). Looks like as of 2022, the 2016 vintage was a pretty standard “mid-2’s” MF MoM instead of the gnarly “high-1’s” described above. The other vintages can be ascribed roughly to the tech slowdown and not being meaningful because of slow exits, respectively, but yeah idk why people think they’re an automatic 30% IRR or whatever on this forum. That’s not what LPs think and, at this size of fund, not even what they value.
Except lps post net returns so actually this is in line with the above
A very weird thing to "well akshually" but here's one right back at you: Pitchbook lists the TVPI numbers for H&F flagships with the "GP" moniker and you can clearly see the progression over time of their marks by quarter to prove that the 2016 vintage was not some kind of dog at the end of 2021/ beginning of 2022 when it was already fully invested (and more than half distributed).
Idk why that particularly matters to the overall story I laid out but I guess if we're being complete let's be accurately complete.
Still great investors. But yes, the model of paying a great price for a great business doesn't always work when the target sectors face massive slowdowns and competition keeps increasing.
yeah agreed with this
Everybody wants to have massive AUM but nobody wants to return capital to LPs… wild
Like ramming a massive yacht right into the dock
The value is in the GP stake, which grows in value in lockstep w/ AUM, not carry.. esp in crowded markets like software and tech PE.
Until fundraising dries up and people realize in 10 years that the 2020-2022 vintages were the largest funds these funds will ever raise and the GP stake is worthless as there is no exit (the founders exited to dumb bag holders just like their portco's).
What’s the big mystery? Do a DCF on a business and see what it’s worth. Then change the risk free rate to 4-5% instead of 0.5% and see what it does to asset value. Then take projected revenue growth and change it from 12% per annual to 7-8% and see what it does.
That’s what’s “happened” to H&F over the last 2 of 40 years it’s been around.
So in short: macro. Let’s see if their pay up for quality assets and the rest will work itself out philosophy checks out it. It certainly has for the first 38 years, but hey maybe some Prospective Monkeys in WSO know better.
Hmm well that to some extent explains the 2021 fund but there’s a reason I’ve put the 2016 fund in there - that’s a bottom quartile with not even 0.7x DPI.
Funds like Thoma Bravo that are exclusively tech should be even more susceptible to the “in short, macro” trend that you’ve generously used as the one size fits all explanation for h&f performance, meanwhile:
TB 2016 fund : 1.5x DPI vs 0.65x (bottom quartile) for H&F
I don’t consider TB and H&F of a similar ilk. Thoma is a momentum shop. H&F slow and low.
I don’t think you’ve seen H&F investing in FTX or laying 10-15x revenues for large cap mature LBO targets.
Only thing I would add is that they probably could have sold a number of mature assets sooner, particularly from their 2016 vintage funds. Everybody says they don't market time but that's exactly what you're doing when you choose to deploy capital or sell an asset. H&F themselves have admitted as such.
Performance has benchmarked poorly for a few funds all of which scaled up and deployed really quickly. Also too many cross fund commitments and CVs, lots of senior departures since 2020
That 2016 DPI is quite sad
No wonder they give you 10m DAW as a VP/Principal if it never gets paid…
Anyone that thinks a Principal at H&F will get anything but fucking rich is an abject moron and lacks basic reasoning skills.
The bitterness and hate is so blatant and pathetic. H&F is the best in the business, bar none. You can try to pick at decades long return compression or single fund lack of DPI, but everyone at H&F is either rich, fucking rich, or well on their way their way to one of the two. And the fact of the matter is, none of you hating on them are anywhere close.
I don’t have a dog in the fight, but I respect the coin and don’t delude myself into BS narratives to feel better about my own mediocrity.
It's two clicks lower than Blackstone's vintage from the same year with a two click higher TVPI. Everyone wants a long-term "strategic partner" until it's time to do long-term strategic partner-ing. I think WSO's brains around the return cycle of a fund that's this size has been broken by the string of MMs who double in size every two years; the MFs quite literally have a different business model that's more, not less, valuable during overall or sectoral activity slowdowns.
Totally get that on biz model - I meant sad for carry / returns. Too much £ after too few assets!
To me, that just screams "Can't mark em down, so we are going to hold them, clip fees, and cross our fingers"
Median DPI for a 2014 vintage fund (10 years ago!) is 1.27x. Thats at the end of a 10 year bull market.
IMO the ratio of PE capital to good investments is way too high and totally out of whack.
Bingo, the good companies have been sold from that period but there's so much bull shit in PE portfolios that deep down high-ups know are dead $ but they have to keep the train rolling so can't mark them down (yet). Even more the case up market where there are no exit strategies outside of an IPO which is dead and probably stays dead for a long time as public markets eat up and spit out low growth/high debt businesses (the vast majority of non-tech PE btw). So many companies that got taken public by PE have gotten smacked 95% from their IPO price and are dead (Leslie Pool is the latest victim).
A few people have commented the basic explanation of Macro for h&f performance which is obvious but my point is that h&f RELATIVE performance is weak - all funds are suffering from macro and some are much more tech exposed but their performance has been much stronger e.g TB Francisco - so chalking it lazily just up to “macro” just doesn’t bear up to a basic critical analysis
Performance remains weak. They are similar to Vista and TB in the sense that they all 3 are willing to pay market clearing prices for assets they like. The TB approach is to buy down the EBITDA multiple and drive cross-sell through aggressive buying-and-buliding into adjacenet areas. Vista has their famous playbook that basically transforms a 20% grower low margin player into a ~15% grower with 20-30% margin; very effective rule of 40 math. H&F doesn't really have as much of a standardized approach and has relied more on (relatively) the multiple expansion in the tech world than the outsized organic growth strategy of Vista or the outsized inorganic growth strategy of TB.
bump
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They've exited 5 or so assets since this was written, and may sell Cordis for something like an 8x.. they'll be fine. Still the best rep in the industry, bar none. Show me a single fund that has scaled to mega-cap size and has consistently put up Q1-type returns. Even the traditionally touted names here (think TB, Veritas, FP, CD&R to an extent).. just take a look at the debt trading levels on some of their portcos from 2020/21 vintages
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