Which funds are ticking time bombs?
Inspired by all the American Securities news recently. I recall when I was graduating from business school they were among the top targets for people, above some of the MFs for their perceived returns, culture, and growth trajectory only for them to blow up out of nowhere.
Any other firms come to mind that are seemingly doing well but could be in trouble in the near term?
Tons of firms went from $1b funds to $5-10b funds the last 10-15 years. A lot of those will have issues going forward similar to AS.
Yep... especially those with a reputation for overpaying. Exacerbated in all the supposed "core-plus infra" that attracted lower cost of capital - it's often not as "infra" as they claim, not scalable without terrifying capex, and the growth potential is... dismal in the long term
Judging by universally stretched P/E ratios, a FED rate that won't go much below 4.5%, and the speed of the Nvidia selloff yesterday......pretty much any fund that isn't short is flirting with annihilation.
Take your meds
please point me towards the pe funds with short investments
They must have already gone under - I can’t find them anywhere!?
I mean....there's your answer ;)
It's just fun to come back and read this every once in a while XD
Clearlake
Can confirm
Insight
They just crushed with their recent sale to MasterCard.
Hard to not imagine Thoma Bravo being somewhat slightly fucked in the next 2~4 years after buying tons of software shitcos at crazy multiples in 2021
There is no shot any of those massive take privates they did go back public or to another sponsor at anywhere near the level they paid with the negative market sentiment that isn't going anywhere anytime soon.
My question is how fucked can they actually be? They’ve scaled to ~$150B AUM and have had very solid returns - are we just expecting straight donuts, long holds, and a heavy loss ratio in those few funds that were deployed in 2020-2022 (I believe it was around ~$59B deployed in that time period by TB).
They’ve even raised a majority of their NEXT flagship fund - are LPs just more blind than the average people on this thread? Or there’s more to it? I would love to hear any further thoughts.
Bump
Don’t get me wrong they’ve made some steep purchases but what a lot of people underwrite / give them credit for purchasing companies at isn’t really what they’re purchasing them for. Instead of the Revenue / ARR multiples people quote, they’re most often buying off a synergized PF EBITDA figure on Day 1 and are going deep operationally (systems, HC cuts, etc) to get there over first 6-12 months of the hold.
Vista Equity
Vista made some overpriced investments but will be fine. Certainly not one of the worst offenders from ‘20-22.
Their issue is their funds post 2005 suck...2007 fund still has 3 companies and fund has a 7% IRR. The remaining companies are some how held at cost but are likely donuts. Best days are long, long behind them. Follow the spin outs of Vista if you want funds actually on the rise.
TH Lee and Providence Equity come to mind for me.
Could you elaborate? Thought Providence was doing decent
How so
Many have already fallen.
Thoughts on Arcline, THL, Golden Gate and Charlesbank?
Hasn't both THL and Golden Gate been basically hobbling along for years anyway? Charlesbank likely going way of AmSec (except already was smaller to start with).
What you are seeing is industry wide retrenchment - LPs are pulling money out. Bubble burst etc. The cycle is just slower in PE because the capital is locked up for so long. So many portfolio BKs / distressed exchanges / liability management is taking place and will take place. We haven't even hit a recession yet.
Arcline deployed a lot during 21-22 and I heard one firm say they overpaid by a lot in auction processes. But I have no specifics.
What’s next for like an Onex? They failed to hit their funding target, but if existing investments deliver presumably they’d bounce back once fundraising is generally in a better spot? Haven’t really heard of mega funds going bust
They have shed a bunch of IPs. Difficult place to be right now from what I hear
Centerbridge have hit all of their recent fundraising targets, so not sure they really fit in that list
Tell me you’re not in the industry without being in the industry.
Centerbridge is on its fourth fund. Do you know what the size of that fund is? What was the size of the prior fund? (Hint: 2x the size of the successor fund).
Carlyle? Really?
Also, I feel like the ONEX hate is overblown.
Overblown? They have no fund?
The best way to judge from the outside is looking at fundraising trajectory and exit rates - ultimately, funds need to give money back to raise new funds (at least eventually in the long run). If a fund hasn’t exited anything in the last few years it’s probably a sign that a) they don’t have anything going well enough to exit and b) LPs aren’t as likely to want to re-up if they already have a bunch of money tied up with a manager.
If a fund went from a $1b fund to a $5b in the last 5 years, it means they either have phenomenal returns and will keep growing or they will stumble soon. A fund that has been steadier (but growing slightly) just has much lower risk of reverting to a previous smaller size.
This current fundraise is where cracks are showing. Everyone raised monster funds in 2021. Most are now re-raising since everyone did so many deals in ‘21-22.
If someone is posting a good fundraiser (getting to the same size or larger reasonably quickly) that is a great sign in today’s climate.
If they’re cutting targets or have just been in market for years, stay away.
Agreed, although my main caveat is this can take years to play out. For example, if a fund raised in 2022 with 2-3 investment period. Then, they'll try to raise the next fund over 2 years. Now, it's ~2026/2027. Just be cognizant it takes time.
Honestly any fund that marks to 2x gross but is sitting at like 0.1 DPI with no exits on the horizon. They’re fucked if they need to fundraise any time soon. And that could apply to a number of late stage growth, crossover, momentum players. It’s why you’re seeing funds take NAV loans, synthetic liquidity solutions, etc. Pretty jammed up exit environment if we don’t see M&A and capital markets activity pick up in the next year or so. And then the question is do you get rid of the shitcos to double down on something you’ll get high returns from later on, or do you sell what is being valued highest today to get more cash back to LPs and use that goodwill to fundraise into a hopefully nice vintage. All depends on your time horizon and the relative quality of opportunities you’re seeing within your strategy. Note - this is mostly from a minority investor perspective.
This right here
Platinum's latest fund is an absolute disaster - LMEs left and right
Silver Lake getting crushed
Ares' flagship corporate PE fund (not their special opportunities fund which is getting rehoused into credit) struggling
KKR not in any real sort of danger but taking a 0 on the biggest PE check ever written must hurt
Platinum just had an amazing fundraise no?
Platinum is the most inaccurately portrayed fund on this website. Every time they’re mentioned it’s like “so many zerosssss” but, like, that’s the model. You probably have a bunch of dogs at KPS too but the hit threshold is uncapped because of the value orientation. People don’t like Platinum because of the specific personalities there and the fact that the basketball team sucks and other intangible factors but there’s a reason LPs flock
Which one is the KKR bagel?
Envision
What’s up with Silver Lake?
What's the issue with Platinum?
What was KKR's doughnut?
Also, what is an LME?
So TLDR - pretty much all of them is the answer.
del
Who said Clearlake was doing well…
Following
Any insights into BX TacOpps and why some people say that its declining? Heard that it relates to internal politics + sr people departing
Victim of its own success in some ways. Tac Opps 10 years ago was a very cool group that did everything from growth/VC to MM buyouts to distressed credit to infrastructure—i.e., anything that was compelling but fell outside the mandate of BX’s other funds. Over time, the more successful parts of the business (growth, infra, etc.) were spun out into their own separate strategies. Meanwhile other funds started strategies focused on weird illiquid stuff so BTO wasn’t the only game in town. As a result the group is a shadow of what it once was.
Plus Blitz is retiring at the end of the year
Plus Blitz is retiring at the end of the year
Plus Blitz is retiring at the end of the year
For most financial sponsors, the key is how leveraged you are. If your leverage is really high, then with interest rates being much higher, the private credit guys and the money lenders are going to eat into your equity really fast, and before you know it, you've blown multiple covs and either need to cure it with more money (which often doesn't work) or surrender the company to the lenders. Less leveraged players can just hold onto bad investments for a long time and tread water, and this generally doesn't result in losing catastrophic amounts of money, but the returns are also lackluster, which hurts big-time on the fundraising side.
Hold periods are getting longer. There are lots of failed M&A processes. M&A deal volume is pretty low compared to COVID times, but has picked up a little bit from the trough. A lot of people who would normally consider going to market are holding off because they know that people are not willing to buy at the same multiples they were a few years ago. There's a lot of amend and extend, backroom negotiations, and grappling with lenders going on right now.
Private equity feels like perma-equity sometimes, that is, when they don't get their clocks cleaned by being overlevered. A lot of healthcare rollups are in real big trouble.
Last sentence I've seen first hand with people i know at port co's. Specifically in practice roll-ups.
del
A lot of the doctors figured out that you can just work less and still do okay, even if practice profitability goes down. They aren't incentivized to do more like an owner would. RCM and integrations are a nightmare. Sometimes people will try to consolidate the payor contracts, but the payors always know best and have the last laugh. There's a lot of other things I could mention. It's a mess.
Thoughts on Francisco Partners? does it face the same risks as TB/Vista?
I mean yes.. they are literally all bidding on the same deals
I've pounded the table on here that these $10b+ funds have little to chance of producing returns we saw from these same firms in the past (when they were $1b funds). There's only so many companies they can bid on and they're all valued at billions of dollars, making a 2-3x return much harder to produce than buying a company at $100mm EV. Taking a public software company that's down 90% from ATHs (and on it's way to a donut because public markets destroy companies that will never make a profit and have declining revenue to boot). Classic catching a falling knife.
Whitehorse liquidity partners (Dawson).
What have you got against Dawson?
It's 1.05x TVPI and 4% IRR after 9 years.
I keep seeing Dawson hate but at the same time their AUM continues to climb.
I get that it’s technically paywalled and the numbers aren’t perfect but these kinds of discussions would be really well-served by people citing actual Preqin and PitchBook data on returns, marks, DPI, etc. Some notable zeros that hit the news, or even some 0.8x tech investments from 2021, are not a barrier to decent fund-level returns and successful raises.
I just feel like this forum has had way too much of the “oh they’re going under” / “but they just raised their target!” dichotomy or the inverse “Parter Name x is a stone cold killer” / “fund marked at 1.5x” juxtaposition when talking about the very same fund and it ends up just not being helpful.
How would high-schoolers / college students / and maybe the occasional IBD analyst or two that make up 90% of the readership/active users here have access to Preqin or Pitchbook? =)
Actually, just a PSA - Pitchbook has pretty extensive coverage of universities / MBA programs and gives free student accounts. I had better Pitchbook access as an MBA student than PE Principal lol.
Have to agree with this. I used to hype up a few firm I thought were cool pre-MBA on here only to find out via PitchBook (MBA student subscription) that they were underperforming vs. average funds their size lol.
I don't think Gryphon is doing well. Sun is going down too.
Don’t worry guys, just throw shit into a continuation fund, mark your own shit up, and raise a new fund.
In my experience most CV investors are pretty sophisticated. If it’s a single asset CV they will price the asset at market and the sponsor will receive the same amount of capital as they would have selling the asset on the market
cv investors are retarded and have to lose [state/province] teachers money somehow
i have seen people put $bns to work only for the co to lose 20% of EBITDA within the year
Marlins finished due to latest fund performance in the US. Management of the European business are trying to carve themselves out and rebrand
Can anyone validate this claim?
Stonepeak.
Care to elaborate?
Please tell us more
Carlyle is a shit show internally.
Blackstone life sciences is a mess
What's going on with BX Life Sciences? Thought that was a growth area for them.
like everyhing BX related they have to go so damn big things don't work anymore. Clarus was like $200mm fund before BX bought them and now it's 15x that, just doesn't work at that scale.
Is there new stuff at Carlyle? Thought the big mess was early last year
Culture sucks nobody who's there wants to stay - the ones that do stay because it's too expensive to leave. They don't have a good handle on the smaller firms they've bought
How’s TPG doing?
How are Bain Capital and Advent doing?
I wouldn’t let my maid’s kids work there
Damn why 😭
Seems like they're doing well - old long-tenured names. While some blow ups (Thrasio), overall funds perform as well as they should for funds that size
Bain perpetually underperforms. Advent is a good fund
How is Altas doing?
I don't know and I don't care. What I do know is that those guys fucking suck. Hate working with them.
The founder is such a pompous tool box - "we like to take our time with investments, we are very selective". Yeah, good job selecting a turd. Lack of ambition masquerading as prudence.
sold an asset at a loss recently.... Can't be great given they only own like 7
which asset? Source?
.
.
Source on exiting at a loss? Source on segwick?
Anyone have views on Sixth Street post separating from TPG?
Bump curious too
Avoid.
Care to elaborate?
Lots. Saw an article recently on PEI, that ~1/14 funds is at risk of a clawback. Tech, Consumer and Industrials have all been soft the last few years. Higher interest rates certainly haven’t helped. There are a lot of problem firms out there.
how's I Squared doing? Insane IRRs for an infra fund but wondering if that's sustainable going forward
Where does Bain Capital fit here?
Will do just fine
Source?
The only right answer is Carlyle. Consumer and tech gone. All talent leaving. All new associates are dogshit 3rd year IB associates who volunteered to be first years. Horrible returns.
Europe got absolutely nuked and is dead, except the CETP team
Heard rumors of Carlyle tech winding down but what happened exactly? Were people reallocated to other groups or let go?
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