REPE Funds with diversified fund lines

All these repe funds now diversifying across core, core+, opportunistic, debt, separate account. Just asset managers now, collecting fees. They've lost the incentive to overperform. hit the bear minimum required returns, collect the management fees, and roll the investors into the next fund at a larger $ amount since allocators are too lazy to underwrite an entirely new fund any way.

In that light, what are some of the most reputable, or under the radar, repe funds that just run one opportunistic fund line with a broad mandate?

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Comments (6)

Nov 24, 2021 - 4:10pm

Investment Analyst in PE - Other

All these repe funds now diversifying across core, core+, opportunistic, debt, separate account. Just asset managers now, collecting fees.

So, just minor terminology here... but you mean "firms" not... "funds"... those are big time different concepts. As to them being "just asset managers now".... this has always been the case... that is what the business is. Firms raise money based on mandates/desires of their LPs, the LPs drive the show, also just nature of the business. 

Regardless, just start scanning the bottom 50 of the PERE 100 list, will probably find some firms that operate like you suggest (could easily have separate accounts of course, I mean who would turn that down!) 

  • Investment Analyst in PE - Other
Nov 24, 2021 - 4:27pm

okay grammar police you got the intent...chill dude, clearly I know the difference between a fund and a firm. And the concept of being managers I would disagree with. a FIRM that only runs one opportunistic fund line likely is getting the bulk of pay through promote and aren't managing multiple billions of dollars, they are very incentivized to outperform vs what I mentioned in the title summary.

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Nov 24, 2021 - 6:14pm

I guess you havn't read the various "what is REPE" and "is this REPE" posts that happen often on WSO. A lot of people seem to confuse firm type and fund/business strategy (generally missing that firm can do many strategies at once and shift strategy/focus over time). So, take it that I am playing "grammar police" as I know who reads these! (I stipulate that you, OP, have the idea correct).

I think you can find many, small (read.... very unknown) managers running a single fund. This is how people tend to start when "striking out" on their own. 

I'm pretty sure everyone is very well incentivized to outperform, and do you really think any manager is going to pass up deals/opportunities that fit within the fund guidelines if they think they will outperform benchmark or target? Of course not. 

Is it easier to find "home runs" when smaller? Sorta, one "big" homerun deal can juice the overall fund returns much easier than when just a small amount of larger fund. BUT, lack of scale has costs, like ability to do deals and compete (gotta win deals before you can have a shot at outperformance, this is easy to overlook).

This is a BIG reason why the large groups (and their large funds) like Blackstone can do so well, they can buyout deals (whole firms and large portfolios) at the drop of hat. Those lead to big returns if they can "flip" or otherwise boost value (The BX buyout of EOP is the grandest story of this). s

So ironically, if you are an investor (LP) and want your best shot at "outperformance".. you probably will sign up with the big managers. Scale matters too, both to the LP ticket size and the returns profits back to the manager themselves. It's an often said axiom... you can't eat IRR. Related thought... 1% can make you rich, and easier to boost AUM than get deals that will return 30% IRRs to turbocharge the payout from the managers promote. 

That's why you see managers growing to scale when possible, and the smaller "single fund" operators there not by choice/strategy, but by reality (i.e. they can't raise funds otherwise).

Nov 26, 2021 - 12:31pm

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