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Private Equity footprint |
rffrydr
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 Posted: Tue Oct 10, 2006 6:01 pm Post subject: Private Equity footprint |
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Some interesting stats from the FT:
http://www.ft.com/cms/s/1eeafc58-4d72-11db-8704-0000779e2340.html
"For all the headlines and the high profile, the private equity market still remains small relative to traditional bond and equity markets: worldwide, private equity investments amount to around $900bn, which is a fraction of the $60,000bn in the mainstream bond and equity markets."
That seems pretty big to me; esp. if you stripped out the "buy and hold."
"Thomson Financial, in conjunction with the European Private Equity and Venture Capital Association, estimates that the net pooled internal rate of return since inception for all European private equity funds formed between 1980 and 2005 was 10.3 per cent. But, if this seems good, it masks two crucial factors.
First: the variation in performance between different private equity funds is enormous and far higher than for conventional equities and bonds. Second: the returns are heavily skewed towards the top performing funds – again, far more so than for UK equity funds.
Thus, while 10.3 per cent was the overall figure, the pooled return figure for the top quartile funds was 22.9 per cent while the median rate of return figure was a less impressive 0.5 per cent. In other words, nearly 50 per cent of funds recorded a negative rate of return."
That's what you'd expect. And I expect what you'd want. I just wonder isf that's what the San Diego retirement fund expected.
No doubt some of those 50% will surprise on the upside all-of-a-sudden (east german property?). |
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rffrydr
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| Posted: Thu Aug 04, 2011 6:44 am Post subject: |
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Asia present new "challenges":
LEX
| Quote: | | Carlyle Group: Chinese puzzle: Investors have been feeling pretty good about Carlyle recently. In the past five quarters the private equity group has made $15 billion in new investments and returned about the same amount of money to its investors. Its competitors have generally been more cautious. This week Carlyle announced the latter would take a minority stake in Haier Electronics, a unit of a Chinese white goods company listed on the Hong Kong Stock Exchange, with the right to securities representing 9% of the company and one board seat. But why should investors pay fees of almost 2%, plus a chunk of any gains, to take minority stakes in public companies? After all, if they like Haier, they can buy the shares themselves. A secret of private equity deals in Asia is that many are not private equity deals at all. The firms investment strategies are supposed to be about acquiring control stakes, not passive minority slivers of listed companies. That forces firms to choose between doing very little in the region, or doing things they have little business doing. |
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rffrydr
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HenryTo
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| Posted: Sun Dec 26, 2010 6:05 pm Post subject: |
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2011 PE Outlook per PEHub Wire:
| Quote: | Investors Seeking Fee Structure Overhaul in ’11?
By Jeff Goldfarb, Breakingviews
The buyout industry should slowly emerge from its fundraising drought in 2011. Investors will be more inclined to put money into private equity after having more capital returned to them in 2010. But it is still a buyer's market, and the time is ripe for investors to push hard to overhaul the fees they pay.
It took the last seven quarters to match the $365 billion the global private equity industry raised from investors in the first six months of 2008, according to research firm Preqin. There could be fresh momentum after an uptick in successful sales of investments in 2010 and with big initial public offerings of HCA, Nielsen and Toys R Us among those teed up. But it still won't be easy for buyout firms to raise new capital.
Blackstone Group provides a cautionary tale. The blue-chip buyout shop expects to close its sixth fund after raising nearly $15 billion. It's an impressive sum, but only about two-thirds of its last effort. Meanwhile after a good year BC Partners, the European firm, is ambitiously gunning to raise 6 billion euros, only a little more than the fund it closed in 2005. Rivals that lack the profile and investment record of such industry giants will struggle to get anywhere near what they have raised before.
Even the best of breed, however, could find themselves over a barrel if investors choose to use their negotiating leverage. Again, Blackstone provides some insight, at least on a small scale. The firm agreed to share 65 percent of any deal-related fees with its limited partners, up from 50 percent. That's nice, but there's more chiseling to be done.
First, investors should pound away at management fees. Most firms take out 1.5 percent, even on funds that aren't yet invested – and that has always seemed steep.
Second, the distribution of so-called carried interests should be revisited. As it stands, buyout bosses immediately start receiving their 20 percent cut of increased valuations. Consider a $1 billion fund with 10 investments of $100 million. If the first portfolio company is sold for $200 million, $180 million is returned to investors. But the firm's managers also extract $20 million – even though investors have yet to be made whole on their full commitments.
With many buyout firms fighting for survival and others hard-up for fresh funds, investors have an opportunity to reform the private equity model in their favor. |
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rffrydr
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| Posted: Thu Nov 11, 2010 6:04 pm Post subject: |
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They're talking 400 billion sideline cash needing to be deployed soon.
Look for that long over-anticipated Yahoo deal to finally get done. Alibaba believe it or not is majority foreign owned. Can't see that standing. The only thing in the way 'til now, $25B.
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rffrydr
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| Posted: Tue Sep 28, 2010 6:45 pm Post subject: |
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Musical Chairs:
Private equity secondaries
Published: September 27 2010 15:19 | Last updated: September 27 2010 15:30
| Quote: | After four years of ownership, Blackstone and PAI are keen to see the back of United Biscuits. But if the approach from China’s Bright Food ends with a sale to a trade buyer, other private equity managers should also be breaking out the Jaffa cakes. UB, which was owned by another PE syndicate before the sale to Blackstone/PAI, is a reminder that the industry has seen far too many hand-me-downs for comfort.
Secondary buy-outs, the sale of a company by one private equity fund to another, used to be rare, accounting for about one in every six PE deals during the past decade, according to Dealogic. This year, though, as traditional exit routes have faltered, secondaries’ share has risen to one in three in the US, and over two in five in Europe. |
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rffrydr
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| Posted: Mon Sep 27, 2010 8:13 pm Post subject: |
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| Quote: | Also, with over $400 billion in uncommitted capital at their disposal (the so-called "PE overhang"), sponsors have a sense of urgency to deploy cash before their reinvestment periods expire. That’s compelled firms to explore alternative investment pockets.
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Sideline cash?
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HenryTo
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| Posted: Mon Sep 27, 2010 9:01 am Post subject: |
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Randy Schwimmer of mid-market lender Churchill Financial on leveraged loans. Per peHUB Wire:
| Quote: | Editor’s Note: Today’s guest column comes from Randy Schwimmer of mid-market lender Churchill Financial.
Second Fiddle
Face it: leveraged loans are no longer the ‘big dog’ in the debt capital markets.
That was the clear message at last week’s Thomson Reuters LPC Loan Conference. Over the last three years high-yield issuance has displaced loans from their lead role in buyouts and refinancings, thanks to seemingly endless investor appetite for fixed income assets. The collapse of new CLO formation has also shut off the fuel that fed the 2003-2007 bull loan market. And new institutional money hasn’t completely fallen for floating rate assets, given that rates don’t look like they’ll be floating anywhere anytime soon.
Loan veterans are pretty sanguine about this turn of events. Many witnessed markets ebb and flow over decades, and figure today’s winners and losers will flip eventually.
Still, that day doesn’t appear to be around the corner. Secondary bond prices hit par for the first time in three years, while the loan index has languished in the low 90’s. All told $824 million of cash piled into junk funds last week from money markets and equities. And new high-yield volume this year has already surpassed all of last year’s record totals.
Yet while loan returns lag bond returns this year--5.5% versus 10.3% for bonds--loans provide better protection to lenders in a bankruptcy. Of course, there are other structural reasons why investors prefer loans (seniority, covenants, collateral, and rate hedge). But analysts at Barclays Capital have pointed out that almost two-thirds of junk’s returns so far in 2010 have been aided by the run-up in Treasury prices. Thus adjusted, yields have risen only 3.7%, making loans not only less risky, but more rewarding.
We noted last week that private equity sponsors and pension funds are voting with their feet, stepping into leveraged loans with big commitments. PE now comprises a surprising 17% of all buyers of institutional paper through June 30. How does a 5.5% yield today work for funds that target minimum high-teens (and more likely, mid-twenties) returns?
Of course, the original driver was self-interest. When prices of senior debt in the portfolio companies they own traded down post-Lehman into the silly 60’s, sponsors bought back the debt from lenders desperate for liquidity. Prices then ran up to the 90’s, handing holders over 40% returns. Not too shabby.
Also, as S&P/LCD noted recently, PE firms can participate indirectly in the loan market through their asset management affiliates, and have boosted that share by actively buying existing CLO platforms (e.g. Carlyle/Stanfield and Blackstone/Callidus).
Today it’s all relative value. Private equity returns, while outperforming public market averages over the past decade (not something to brag about), were hurt as the credit crunch blocked available exits and portfolio company earnings softened. That has allowed the high-yield and loan classes to narrow the yield gap.
Also, with over $400 billion in uncommitted capital at their disposal (the so-called "PE overhang"), sponsors have a sense of urgency to deploy cash before their reinvestment periods expire. That’s compelled firms to explore alternative investment pockets.
Over the next few weeks--in a series we’re calling Cracking the Code--we’ll explore how investors seeking yield and stability, and arrangers looking to fill the vacuum left by CLOs, could turn the debt world upside-down again. |
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rffrydr
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| Posted: Sun Sep 05, 2010 11:43 pm Post subject: |
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Burger King. Not entirely disabused of the notion that going private will become a serious trend over the new cycle. Treated indifferently in an indifferent market and regulation coming out of every aspect of running a company will provide a natural push in this direction. That Blackstone or Fortress can provide the pull is another question.
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rffrydr
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| Posted: Thu Aug 26, 2010 6:24 am Post subject: |
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Don't forget the magic dust: tax policy that turns fees and other incomes into capital gains.
Sometimes it really works....before it doesn't. Cerberus' bet on the "American Way":
http://www.businessweek.com/magazine/content/10_33/b4191041673261.htm
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nodoodahs
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| Posted: Thu Aug 26, 2010 5:45 am Post subject: |
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PE is nothing but investing in the stock market, adding leverage through the "illiquidity premium," and losing diversification benefits through having a limited number of holdings.
Agreed some (most?) institutions have lousy timing with their "strategic asset allocation" decisions. They'd be better to set a policy and rebalance periodically, i.e. it's when the position has lost the most over the past few years that they really need to add to it. They're as human as the dumb retail investor, maybe more so.
Tangentially related article on VC
http://www.institutionalinvestor.com/banking_capital_markets/Articles/2654922/Turning-Back-the-VC-Clock.html
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HenryTo
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rffrydr
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rffrydr
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| Posted: Wed Aug 04, 2010 1:49 pm Post subject: |
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....because companies weren't earning any money and everything was a firesale then 
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HenryTo
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| Posted: Wed Aug 04, 2010 12:17 pm Post subject: |
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Random ramblings, courtesy of PEHUBWire:
| Quote: | One of the big knocks on pre-crisis private equity was that it had eschewed its buy-low/sell-high mantra, in favor of buy high and (hope to) sell higher. A lot of it was properly pinned on cheap debt, but some was caused by a sheep-like portfolio land rush (“They did a deal? Well then, we’ll do a deal…”).
I bring it up today because of some new data from Thomson Reuters. It’s the number of announced and closed PE-backed M&A transactions in 2010 (through Monday). It works out to 1,755 global deals valued at just over $103 billion. This compares to 1,558 deals worth nearly $39 billion over the same period in 2009.
In other words, average deal size is skyrocketing. My initial assumption was this was again a case of private equity investors straying from their knitting, perhaps egged on by competition borne of record fund overhang. But then I noticed the median EBITA multiples being paid in Q1 2010 were about the same as in Q3 2009 (between 7x-8x), and the Q2 2010 EBITDA multiple is still way lower than that of Q4 2009.
So does this mean PE firms, in general, are buying stronger companies? Or is there some other explanation for why deal sizes are climbing while EBITDA multiples are falling? |
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HenryTo
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| Posted: Thu Jul 15, 2010 1:36 pm Post subject: |
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What we've been waiting for: Carlyle purchases NBTY for $3.8 billion in cash.
| Quote: | The Associated Press, On Thursday July 15, 2010, 3:27 pm
THE DEAL: The Carlyle Group agreed Thursday to buy vitamin maker NBTY Inc. for $55 per share, or $3.8 billion in cash, in one of the largest private equity deals so far this year. That's 47 percent above the stock's closing price on Wednesday.
THE CONTEXT: Private-equity deals were scarce during the recession but have increased in recent months as economic conditions and credit markets improve.
NEXT STEP: NBTY said it is permitted to solicit other proposals for about a month, but the deal is expected to close by the end of the year. |
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