Lots of big fundraisings recently - on the middle market side The Riverside Company just raised their largest fund ever ($1.5B on a $1.0B target).

"For I am a sinner in the hands of an angry God. Bloody Mary full of vodka, blessed are you among cocktails. Pray for me now and at the hour of my death, which I hope is soon. Amen."
 
hankyfootball:

Anyone else think pre-crisis level fundraisings are a bit premature for this market? Not sure how they plan to deploy enough capital without overpaying.

Definitely. Particularly these MM funds that are moving up in terms of fund raising levels. Just not enough inventory. It could correct in 2-3 years, but there is already a $400B overhang and groups like Riverside have been paying too much for some of the deals IMO.

 
hankyfootball:

Anyone else think pre-crisis level fundraisings are a bit premature for this market? Not sure how they plan to deploy enough capital without overpaying.

Overpaying is pretty structural at least in large cap.
 
leveredarb:
hankyfootball:

Anyone else think pre-crisis level fundraisings are a bit premature for this market? Not sure how they plan to deploy enough capital without overpaying.

Overpaying is pretty structural at least in large cap.

Apollo is known for being pretty disciplined when it comes to valuations and avoiding most auction processes. I saw one of their LP presentations showing their average ebitda transaction multiple has been around 6-7x.

 

I just read a report saying that in 2013 PE GPs worldwide altogether raised new capital to the tune of $1B per day... So far it seems that 2014 may turn out to be even better. The recent buoyancy of the U.S stock market helped many funds exit their positions with successful IPOs and subsequent stock appreciations.

Apollo had quite a bit of trouble early on with their fundraisings. I know some senior people that left there in part of because of that. They have recovered quite nicely since. In particular, they have been making some nice profits from Realology with its IPO in late 2012, despite having acquired the company at at top of the market right before the RE bust and at one point having lost over half of its value, if I remember correctly.

Too late for second-guessing Too late to go back to sleep.
 
Best Response

Really? Which senior people? Everything I've seen and heard is that by all accounts Apollo expected and did in fact raise a banner fund out of the gate. They had a phenomenal performance in their latest fund, several standard deviations above the mean for that vintage.

In terms of dissecting that performance and figuring out how they did it...

Once the downturn hit, the large cap PE firms (and all PE firms more broadly) were really sucking wind, in no small part because of the "iconic" mega-buyouts done during the boom years (I'm looking at you FirstData, SunGard, TXU). These deals got clobbered in the downturn and Apollo by was no means immune to the pain. Most of the corporate world was teetering at the edge of oblivion and investors and managers alike were overwhelmed with the task of keeping their companies afloat.

Most investors did what smart people do in this market environment, they sat on their hands until the storm cloud subsided. What Apollo did... and what drove the preponderance of their above-market returns was double down by buying the debt of their portfolio companies (and the portfolio companies of their competitors) at a discount. What's surprising is that they did much of this before the market really collapsed, when much of the LBO paper they bought wasn't even near distressed levels. But it ended up working out quite well for them. Did they make these investments because they had the foresight to see the impending doom (in which case why wouldn't they have waited for the debt to actually trade down more meaningfully) or did they see it as a temporary dislocation and a good way to make a quick profit on a flip while still preserving their callable capital? The only people that know the answer to that are the ones that made the investments.

What is apparent is that Apollo was capable of making these investments and consequently these returns because of the structural flexibility of their investing mandate. That is to say, they had the ability to and did indeed toke capital provided to them to invest predominantly in control private equity investments, and deployed it into the fixed income asset class.

Call me a hater, and I probably am, but I'm of the view it was more of a lucky mistake. It doesn't make sense to me that they saw the magnitude of the doom coming because why would they buy in before the debt really traded down substantially?

The view that best case scenario the temporary pessimism in the market will subside and we can make a quick low risk return and still reinvest the capital and worst case scenario if the world does fall apart we will have all this capital sitting here and nothing to do with it, so lets put it in a lower risk investment that will still be money good. Oh and by the way by using leverage to buy the debt you further juice your returns and when the counter parties you're buying the LBO paper from is Citi, Lehman and BAML... well those guys knew the music was about to stop and were rapidly trying to de-lever their balance sheets before they got caught on the wrong side of a shit storm.... the anyway... that does translate equity-like returns via a a rather shrewd investment and one I'd give them credit for.

 

Interesting take. Basically exactly what happened with Hilton.

"For I am a sinner in the hands of an angry God. Bloody Mary full of vodka, blessed are you among cocktails. Pray for me now and at the hour of my death, which I hope is soon. Amen."
 

Trying to time the market is a mug's game, they saw value at whatever levels and took it as a long term position / asset, in an asset they knew very well. Further, they've often invested fresh equity in, too, alongside their holdings of debt taking the hit, and keeping other lenders whole.

"After you work on Wall Street it’s a choice, would you rather work at McDonalds or on the sell-side? I would choose McDonalds over the sell-side.” - David Tepper
 

Dont think your statement about buying too early is 100% true: http://www.forbes.com/sites/nathanvardi/2011/03/11/how-billionaires-los… They bought some debt at a 10% discount and converted to equity from which they decided to invest more. I don't think you can get a decent return by having your entire equity stake get wiped out only to hold onto post-reorg equity without investing much more after.

 
brandon st randy:

I just read a report saying that in 2013 PE GPs worldwide altogether raised new capital to the tune of $1B per day...
So far it seems that 2014 may turn out to be even better. The recent buoyancy of the U.S stock market helped many funds exit their positions with successful IPOs and subsequent stock appreciations.

Apollo had quite a bit of trouble early on with their fundraisings. I know some senior people that left there in part of because of that. They have recovered quite nicely since. In particular, they have been making some nice profits from Realology with its IPO in late 2012, despite having acquired the company at at top of the market right before the RE bust and at one point having lost over half of its value, if I remember correctly.

That's not true, Apollo knew they were going to be able to raise a large fund, and even after raising the target size a few times they're still well oversubscribed. If any senior people left, it definitely was not because of concerns over fundraising.

 

Eveniet eos enim ullam molestiae. Totam ut qui sed sed. Expedita voluptas voluptas tempora temporibus.

Ut repellat rerum exercitationem ea. Quibusdam illum quaerat ea explicabo aliquam. Est reprehenderit porro itaque.

Eligendi itaque laborum illo culpa. Velit quis voluptates est quia consequatur. Et blanditiis aliquam perspiciatis quam.

Est in hic voluptas nemo officiis repudiandae hic. Nesciunt itaque natus sequi repellat vitae. Ut eos nobis sint quo ipsam.

Career Advancement Opportunities

March 2024 Investment Banking

  • Jefferies & Company 02 99.4%
  • Goldman Sachs 19 98.8%
  • Harris Williams & Co. (++) 98.3%
  • Lazard Freres 02 97.7%
  • JPMorgan Chase 03 97.1%

Overall Employee Satisfaction

March 2024 Investment Banking

  • Harris Williams & Co. 18 99.4%
  • JPMorgan Chase 10 98.8%
  • Lazard Freres 05 98.3%
  • Morgan Stanley 07 97.7%
  • William Blair 03 97.1%

Professional Growth Opportunities

March 2024 Investment Banking

  • Lazard Freres 01 99.4%
  • Jefferies & Company 02 98.8%
  • Goldman Sachs 17 98.3%
  • Moelis & Company 07 97.7%
  • JPMorgan Chase 05 97.1%

Total Avg Compensation

March 2024 Investment Banking

  • Director/MD (5) $648
  • Vice President (19) $385
  • Associates (86) $261
  • 3rd+ Year Analyst (13) $181
  • Intern/Summer Associate (33) $170
  • 2nd Year Analyst (66) $168
  • 1st Year Analyst (202) $159
  • Intern/Summer Analyst (144) $101
notes
16 IB Interviews Notes

“... there’s no excuse to not take advantage of the resources out there available to you. Best value for your $ are the...”

Leaderboard

1
redever's picture
redever
99.2
2
Secyh62's picture
Secyh62
99.0
3
Betsy Massar's picture
Betsy Massar
99.0
4
BankonBanking's picture
BankonBanking
99.0
5
dosk17's picture
dosk17
98.9
6
DrApeman's picture
DrApeman
98.9
7
kanon's picture
kanon
98.9
8
CompBanker's picture
CompBanker
98.9
9
GameTheory's picture
GameTheory
98.9
10
Jamoldo's picture
Jamoldo
98.8
success
From 10 rejections to 1 dream investment banking internship

“... I believe it was the single biggest reason why I ended up with an offer...”