PE funds and private jets?

Dunno about PE but the VC firm that bought me out of a position has a private jet with only around $1B in AUM. I don't really get how the math works.

A long time ago I heard kelso had a private jet. That's about all I have to add here.

Audax deal teams also fly in private jets, although I don't know if they own them.

Front my knowledge lots of deal teams will above a couple billion AUM, but netjets/leasing usually not owning.

A lot of the upper MM funds fly private so they can get to that little industrial company in Alabama and home in one day.

I've never flown on a private jet but have seen informational videos on many of their interiors and the service you get. It isn't bad but if you're dropping $7-8K per person on the flight, doesn't it make more sense to fly business/first class on top notch airlines? Unless you're flying to a place in the middle of bumfuck, nowhere are you really telling me that a private jet is better than going first class on Emirates/Ethiad/Singapore Airlines?

Pretty common for the PE sellsides I worked on, which included some MF deals and some middle market deals. Rarely if ever was it a jet owned by the fund, it seemed to always be a charter.

The funds always make it sound like the decision to fly private results from some calculation of the value of saving time, convenience, flexibility, etc etc. In other words, real economics.

In reality I think its partially real economics but mostly ego-driven and peer pressure driven, i.e. want to project to the world (including the management team you're visiting) that you're one of the big boys who chartered a flight.

My fund's founding partner owns two jets (technically an LLC he owns) which he leases to the fund for deal / portco related travel, charged to the fund and to the portco, respectively. No idea how common that is but always struck me as kind of a wonky arrangement.

As for why, it's some combo of ego, image, and convenience. Like most MM funds, our deals are typically in the middle of nowhere so it's nice to be able to land on a tiny local runway 15 minutes away whenever we want vs. taking the one two segment flight into the shitty regional airport 1.5 hours away from the meeting.

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From a cost perspective/curiosity POV, I was actually surprised at how much of a “rounding error” PJ travel can be. Once you are a committed customer with a high hourly uses per year you are paying a fraction of the full retail price that you would see when you surf the internet or apps. With no surprise, it is a hugely relationship driven type of service and cost.

The PJ/charter business and private airport/FBO (fixed base operator) community is quite small. It is extremely competitive and owned by 3-5 big names while the rest of the universe is family owned and operated. Including NetJets and WheelsUp, there are a bunch of small charter businesses and operators that operate out of the FBOs and the costs can be full retail all the way down to a free/loser sort of thing (i.e. “Hey Schwarzman, you rent my hangers, fill up your flying bus at my gas stations, take dumps in my lounge, and tell all your buddies.... I will buzz your work minions around for $$”). The FBOs and private airports make all the money as glorified gas stations/commercial airline gas servicers with some extra fixed cash from rental hanger space. They then operate charter/medical fights(organs)/helicopters and funnel clients to NetJets/WheelsUp as a way to provide a little something extra and keep the business flowing. As you can see, everyone is working together and greasing each other on the side.

Plus, the average PJ business travel fleets are not as advertised by Floyd $$ Mayweather & Kim Kardashian.

We often use them, although to be fair, it's mostly for PortCo stuff (ie. where we can charge it to the PortCo), we rarely use them for due diligence, meeting investors, etc. Depending on where your companies are, it can be a pain to get to and lead to a lot of lost time so private planes are a huge time saver. For example, we have a company in Baltimore and another in Pittsburgh and we tend to schedule board meeting back to back. The only airline that fly direct is Southwest and they only have 2 flights a day (morning and evening) so we couldn't have both boards on the same day. With a plane though, you can leave home in the morning and be back home for dinner while having attended 2 boards in 2 separate cities since the whole process is so seamless. The $15k or so that we have to pay is 100% worth it, it saves us a full day of work.

They do, but generally only for big dog partners and such

This randomly came up on my YT home page and it's a pretty interesting look at some cases where it might make sense. For example Walmart shuttles regional VPs (not super senior apparently) around so they can do back to back site visits in random cities around the US. Maybe some PE firms do the same math for board meetings or something and made up some justification for the cost.

dont know much about PE but I heard Paul Singer likes to travel in Argentine military vessels.

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My LMM firm with $1.5B AUM has a private jet, but is usually only used by the partners.

Worked at a MF where there was no direct ownership of a jet by the firm but pretty much if a partner or senior guy was traveling for either dili or anything work-related, a jet would come into the picture. Guessing it was a membership which was then reimbursed by the firm on a per use basis but I could be wrong given how opaque the use was. Oh yeah and no one else would travel with said senior person as they'd often have a periphery agenda post-meeting to travel somewhere with friends or family.

At my current role at a large financial institution a majority of the senior team charter jets personally for their own travel - a lot of them via NetJets and the like.

I have a hard time imagining the GPs would want to explain the business rationale behind that expense to the LPs as a part of their management fees. As others have mentioned, when teams do fly private it is on the founders or some other BSD dime. I'm sure there are creative ways to charge a portion of the travel expense to the portcos or fund, but can't imagine a PE fund outright leasing or buying a PJ using only management fees.

Leonard Green loves em apparently

https://www.pecloserlook.org/report/what-information-does-leonard-green…

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Have info from one UMM fund w/ $15bn total aum and top quartile returns. Not sure what the arrangement is on who owns what, but there are 4 jets that are somehow connected to the firm (1 for each industry group / team). I would imagine this is the norm between similar funds....

I was at a ~$3bn fund and flew private more often than commercial. As others mentioned, portfolio companies and potential acquisitions scattered all over the Mid West, etc, way easier to fly private for flexibility. We did usually try to hide the fact that we flew private when meeting with folks to avoid the bad optics of it. 

Flying private isn't a perk. On commercial flights you have the time to yourself to do whatever. When you're flying private you're forced to talk to the Partner the entire time, and usually they're just grilling you about shit. It sucks. 

I started as an associate at a MM PE firm ($2-5bn most recent fund size) that had two PJs - one owned by the Chairman / CEO and one owned by the firm. The Chairman / CEO had a PJ for both business and personal use and would charge the firm for any business-related travel. Any time he was traveling for firm-related activities, the deal team would get to ride along with him (as applicable). The "firm jet" was split amongst the remaining partners, who would duke it out over whose diligence trip or board meeting was more important to the extent there were multiple partners who wanted to use the jet at the same time. Similar to the Chairman / CEO's jet, everybody on the deal team was welcome to fly private if the partner on their deal or portco was using the jet. We had roughly 30 investment professionals at the time (8-9 partners), returns weren't great, and they paid below market so I always found it pretty appalling that we owned a PJ in light of the circumstances.

I have since moved to a UMM fund (>$5bn most recent fund size) where we have roughly 2x the investment team headcount but no private jet. We fly commercial 90% of the time but will sometimes charter a jet to conduct site visits or visit portcos in remote locations. There also has to be at least 3 people from the firm flying on the charter in order for our CEO to approve it (otherwise the cost is unjustifiable for just 1-2 people in his mind). I've talked to a couple of my friends that work at funds of various sizes from MF to LMM and it sounds like my current experience is much more common than my old fund.

As others have stated above, there are certain firms that have made the institutional decision to own a private jet but I don't think that's the case for the majority (or even half) of funds. I do think it is quite common for funds to charter jets when the delta in travel time justifies it. When you're in the middle of a diligence process and every day (or hour) matters, or you're an MD in the midst of an intense fundraising or BD period, the cost difference between flying commercial and flying private isn't as significant as running out of time to properly conduct diligence or burning yourself / your team out through inefficient travel.

Lastly, I agree wholeheartedly with what gufmo said - as a junior person, I much prefer flying commercial than flying private because you have so much more autonomy that way (and earning credit card points and frequent flyer miles that can be used for personal travel doesn't hurt either).

Agreed. not common.

Speaking generally about high finance firms, most don't outright own a jet. But often times if flying to a high number of destinations / with a large group of people in a short amount of time, it is economical to charter a jet given the efficiency offered both cost and time-wise. Also you can land at airports which are closer to your destination that commercial jets can't land at.

Not having to wait at TSA or arrive early for flights really cuts a lot of time out of the travel hours. Every time I've flown private with work we are able to cover a lot more distance and destinations than if we were to fly commercial