Anyone Experience a PE Fund Implode?

Has anyone been a partner / MD / VP / principal / associate / etc. at a PE fund that imploded and collapsed, or at least a fund that was falling apart / stagnating? 

If so, what were the contributing factors and how did you navigate the situation (did you lateral, out to grad school, did you ask for more money, etc.)? Understand that this is a pretty unique set of circumstances and likely won't get many responses, but at least worth asking. 

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Comments (43)

Most Helpful
Oct 7, 2021 - 8:17am

Once it is clear to the fund's founders that the fund is going to stagnate, they pretty quickly switch from growth mode to minimizing cost base to a bare minimum. It can be quite good for those partners as they can extend out the time on assets. 

So if your fund is stagnating / unlikely to raise another fund then best to move on. 

Secondary funds can come in and reset carry on assets but still pretty challenging to raise another fund off that track record. 

Hope that helps. 

Oct 7, 2021 - 8:45am

Thanks sir. One of the thoughts I've been having recently is around the longevity / sustainability of PE as a career path. It's why I've been trying to gather data points / anecdotes around funds that stagnate / die. It sounds like you are implying that PE isn't at a stage where funds are stagnating merely because they can't even find a deal to do --- they can still get deal flow, but it's doing bad deals that ultimately are killing funds today (as has always been the case).

PE is still perceived as an incredibly prestigious + rewarding career path and, though I chose not to pursue that track post-banking, there is always lingering temptation to explore. That's why (to be honest) I think a part of this post is me trying to subconsciously convince myself that I made the right choice.

But am also genuinely curious to see if there are an increasing number of funds that are collapsing, or if deal flow is beginning to dry up across the space. 

  • Associate 3 in PE - LBOs
Oct 7, 2021 - 10:27am

IMO it's pretty hard to get a pulse on that because of how insulated PE assets are from external valuation and the long tail on fund lives.    Take a look at Castle Harlan for instance, which at one point had a billion dollar fund - basically was on the brink of closing it's doors a few years ago but is still somewhat active as an independent sponsor with a couple of portcos left.  

  • Associate 2 in PE - LBOs
Oct 7, 2021 - 11:05am

The last fund I worked at hasn't imploded, but is headed in that direction due to the majority of its investments not working out and continuing to rack up debt. The entire time I worked there the firm was unsuccessfully trying to raise more capital for its next fund and it gradually became more clear it wasn't going to happen as the capital options became more and more....interesting....to say the least (random middle eastern sovereign wealth funds and even Russian oligarchs). As mentioned, due to the long tail of fund lives it can take many years for a proper shutdown to take place and the fund may still make deals in the meantime. 

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Oct 7, 2021 - 3:33pm

I've not personally been witness to this at a fund I worked at. However, a well-known fund down the street from ours is, and everyone knows the juice. Basically, they're known to work their juniors to the bone, have weak leadership and poor culture, (i.e., senior partners taking calls from the beach while the rest of the team is grinding on live deals). A couple of investments went bad in the last few years, and people started pointing fingers. This led to an internal mutiny of sorts. Many people were ousted. They're struggling to hire, and struggling to raise another fund. We'll see what happens.

Array

  • 3
  • Analyst 2 in IB-M&A
Oct 9, 2021 - 1:55pm

What happened at Vestar? I thought they were pretty successful in the MM consumer space

Oct 8, 2021 - 3:25pm

My first fund blew up - joined a well established pe firm which raised a distressed fund that performed extremely well (fund 1). The team from that fund left to start their own spot and the following fund was a brand new team (fund 2). I joined at the end of fund 2 > fund 3 which fell apart during fundraising due to one of the partners leaving and firm founder deciding to shut down the distressed group. As an associate I had been looking around, I got a nice bonus at the end of my first year and was told to find a new job asap/would be paid a salary while I searched. Everyone ended up leaving immediately after besides 1 vp and 1 associate who stuck around to help with liquidation of assets. Both got paid above market and had a chill life for a few years before going elsewhere

Oct 9, 2021 - 3:35pm

Does anyone have experience on what typically happens at a fund where the next fund raise is challenging and ends up being materially smaller than the prior fund? Any perspectives / experiences on what happens to (i) culture, (ii) headcount, (iii) compensation, (iv) strategy (e.g., deploy quickly and raise again vs. smaller deals?)

  • Managing Director in PE - Other
Oct 10, 2021 - 6:21pm

Went crazy in the mid-con, backed weak teams, and had partners who have just been lucky and didn't understand the business 

  • Analyst 3+ in Consulting
Oct 12, 2021 - 11:57am

Novalpina: Many people left to other funds, check out Linkedin 

  • VP in PE - LBOs
Oct 10, 2021 - 2:16pm

Crestview isn't like that but same path. Previous fund raised 6 or 7 years ago at 3.2 billion, their latest fund closed at under 2 billion

Oct 10, 2021 - 2:25pm

There are a few historically well-known funds in the same boat. Very interesting to see the "haves" vs. "have nots" particularly in a market environment where some funds are raising 10-20bn+ funds in a matter of months, and other good brands are struggling. There almost feels like an 80/20 going on here - wouldn't be shocked if actual funds raised looked something like that distribution.  

  • Analyst 2 in PE - LBOs
Oct 10, 2021 - 7:43pm

thanks for the recomm but I think that Abraaj is not the kind of implosion that OP asked for, as it was a fraud. 

Oct 11, 2021 - 4:19pm

Haven't been at one, but energy-focused funds with early-mid 2010's vintages come to mind. So not necessarily the entire firm but certain funds. Some random ones I recall when I covered oil & gas: Warburg Energy Fund ('14), Enervest 7 and 8 ('10, '12), someone mentioned Kayne Anderson, Blackstone and Apollo had some real doozies in the energy space too. Hope that helps as a starting point.

Oct 12, 2021 - 2:12pm

Would add First Reserve to this list as well. It was among the largest funds in the world in the late 2000s and today is a fraction of what it once were. First Reserve raised $7.8B in 2006 and $9.0B in 2009, then raised $3.4B in 2004 after targeting $5.0B, and then raised $465M in 2020. The 2006, 2009, and 2014 vintage funds all had negative IRR and MOIC <1.0x. Encap has had a similar trajectory after all being one of the largest funds in the world at one point.

  • Associate 1 in IB - Gen
Oct 18, 2021 - 9:52am

A lesson in commodity cycles...they'll try to rebrand and market their renewables funds but TBD if that'll save the firms.

  • Associate 1 in PE - Other
Oct 17, 2021 - 8:34am

Ask AEIP. Most recent fund is completely underwater, did a bunch of bad deals, impressive to have screwed up a 2019 vintage already

  • Investment Analyst in RE - Comm
Oct 17, 2021 - 10:40am

Looks like CCMP has followed a similar trajectory to others in this thread. Used to be one of the largest funds while under the JPM banner, last fund raised was in 2014 and headcount a fraction of what it once was. Anyone know what happened with them?

Oct 17, 2021 - 8:51pm

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  • Associate 2 in PE - LBOs
Oct 20, 2021 - 12:51pm

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