13 ms·

Everything Is Private Equity Now

Thev00d00 7y ago
For the lazy/poor: http://archive.is/DJJC5 http://archive.is/DJJC5
- wpasc 7y ago
  i appreciate the link, was the "lazy/poor" word choice necessary?
  - Lammy 7y ago
    I feel like there’s some implicit self-deprecation in their comment considering in order to be able to share it they must have generated the archive link for their own lazy/poor self :)
OJFord 7y ago
This page is way too 'big' - if I zoom out to 50% the text is much more readable, but of course that makes it occupy a silly width, and the navigation far too small. Is there a better way to handle (as a user) scaling content? Maybe custom CSS to change the font size that's remembered per domain?
- fwn 7y ago
  Firefox reader mode does the trick for me. It works that great I usually don't even try to read articles in their newspapers own layout. There's probably a chrome/Safari equivalent.
  - OJFord 7y ago
    Thanks, I do use FF, and have used reader mode occasionally (usually on mobile to avoid obnoxious pop-ups or footers when ublock is more of a pain to use) - but what I hadn't found until you commented was the font size, width, line height, and background colour settings. That's pretty great.
- gnomewascool 7y ago
  In Firefox, in the menu (press Alt if it's not visible by default): View > Zoom > Zoom Text Only and then zoom in/out as you desire. The setting is unfortunately global, so you can't zoom in the page on some sites and zoom in the text on others. (You can toggle the setting, though, and the "zoom amount" is remembered per-site, irrespective of toggling.) There are probably also some extensions that would be more flexible and work on more browsers. (I'm pretty sure that Vimperator (RIP) had an option to separately change text size and overall zoom.)
  - OJFord 7y ago
    Thanks, I didn't know about text-only zoom. > the "zoom amount" is remembered per-site, irrespective of toggling. I'm pretty sure it isn't with stock Firefox - I use an extension for that.
StevePerkins 7y ago
To me, the most striking thing in this article ISN'T that there's a vast, opaque, multi-trillion dollar shadow stock market for institutional investors and elite individuals. Instead, it's the fact that over the past 25 years, these vehicles have only managed to beat an S&P 500 index fund by 1-2% after fees. And that over the past 10 years, more than half of them are underperforming a passive index fund. Even if I had a few extra billion dollars lying around, I wouldn't get involved with private equity firms. This audience comes across like a combination of insolvent pension fund managers desperate for a way out, and wealthy individuals who just enjoy the feeling of being in an exclusive club. With dubious "financial engineers" fleecing them all through fees, and hollowing out thousands of private companies to make the whole system possible.
- CPLX 7y ago
  > I wouldn't get involved with private equity firms The website you posted this sentence on is owned by a private equity firm.
  - C1sc0cat 7y ago
    Y combinator is more the VC model that the PE one.
    - elliekelly 7y ago
      VC is Private Equity. All thumbs are fingers but not all fingers are thumbs.
      - mcv 7y ago
        My son has lately been claiming that the thumb is not a finger, and he can explain why. I'm not sure who to believe anymore.
        severine 7y ago
        https://www.lexico.com/en/explore/is-a-thumb-a-finger https://www.lexico.com/en/explore/is-a-thumb-a-finger
deleted 7y ago
[deleted]
pjc50 7y ago
Private equity is not, in itself, a problem. Leveraged buyouts however are starting to become a serious problem. They allow the hollowing-out of functional but low-profit companies into debt-ridden shells. The most recent example in the news is Pizza Express: what is a restaurant chain doing with £1bn of debt? https://www.bbc.co.uk/news/business-49957551 https://www.bbc.co.uk/news/business-49957551 This is bad for staff and bad for creditors.
- barry-cotter 7y ago
  It is bad for staff. Working for a company that’s been bought by a PE firm sucks. Almost always layoffs are coming and you’ll have to do more with your resources or more Witt fewer resources. Creditors are lending their own money. If they make a bad bet that’s on them, should have done better due diligence. What PE is good for is increasing economic efficiency more generally which redounds to the benefits of consumers in the long run.
  - Blackstone4 7y ago
    Regarding layoffs: "We find that the real-side effects of buyouts on target firms and their workers vary greatly by deal type and market conditions... This conclusion cast doubts on the efficacy of 'one-size-fits-all' policy prescriptions for private equity." [0] Pro Rata https://www.axios.com/newsletters/axios-pro-rata-ed716a8a-3790-4e1d-8a56-d05db1e4e803.html https://www.axios.com/newsletters/axios-pro-rata-ed716a8a-37... It really depends on the PE firm and the company. In the software space, there are large PE firms which have a tendency to cut headcount because in their view, public market CEOs focus on growing revenue at the expense of profitability. This tends to lead to excessive full time employees over and above best practises...so if the previous CEO overhired and the PE firm fired people....then it's the PE firm that's in the wrong right...end of story? I'm not saying you are saying this but this is the underlying vibe I get in these kind of discussions....
- travisoneill1 7y ago
  Why do these companies somehow deserve to exist? Why can't the creditors make their own decisions on who to lend to and pay the price if they are wrong?
Blackstone4 7y ago
I work in the industry and whilst the article does make some good points, it largely feels like a hit piece focused predominately on the negatives. In a way there is a clear lack of nuance....for instance: "the PE firm and its investors can put in a comparatively small amount of cash". PE deals are typically funded with ~40% to 50% equity with the rest in debt. They are putting substaintial equity into these companies. Secondly, the PE ecosystem is large with a significant number of places with a range of different investment strategies. I don't have the time to make all my points...PE is a lot more gray than the article paints and it's easy to point to the big, evil capitalist who make money and say they are ruining the world... As an example, I've seen private equity save companies. One group acquired a company that was losing millions with a plan to return it to profitability and keep jobs....these kind of deals are never discussed in articles like this because all we hear about are the bankrupticies because they go through court...
- notfromhere 7y ago
  The PE "fund" puts in 30-50% equity, largely coming out of LP money. The GPs put in 1-2%. So while the GPs act like managers, they have little skin in the game and aren't liable for the debts they rack up on the PortCo. Growth equity has seen some success, but the vast majority of PE activity is based around financially engineering a PortCo to transfer value from the PortCo to the fund, regardless of how it wrecks all other stakeholders or the long-term health of the PortCo.
  - Blackstone4 7y ago
    I understand that the majority of equity is coming from LPs but that's not the point I was making. The way the author framed it sounded like the deals were 90% debt and 10% equity which is not the case. It depends on the size of manager and I've seen GP commits range from 1% to 10%. The largest dollar commitment I've seen is in the ~$500m ballpark....either way what matters is whether the GP commit is meaningful in terms of their own net worth due to alignment of interest. Again this is not a black and white issue....some GPs do have skin in the game. Most people do not understand debt including the author...at the moment, debt is so darn cheap, tax-effecient and covenant-lite that it's almost free money.... I would rather be on the equity side of the equation then be a lender....whether that would be a bank or high yield/junk bond investor. I would argue that raising a PE fund is asymmetric for the manager since heads: I earn plenty of carried interest....tails: I get fat from the management fees and hold onto the portfolio companies for as long as I can (~10 years). Which segment of the PE market are you refering to? What do you mean by financial engineering? I've spent a lot of my time in the US LMM and I see plenty of value creation/professionalization of small businesses. That said, I appreciate the fact that that kind of work is harder to do at the larger end...and it's more about the leverage, buying right with the right secular trends etc. Again not black and white.... For example on job creation: "We find that the real-side effects of buyouts on target firms and their workers vary greatly by deal type and market conditions... This conclusion cast doubts on the efficacy of 'one-size-fits-all' policy prescriptions for private equity." If I was to use an analogy with regards to the article, its as if someone tried describing the entire software industry to an outsider by only refering to Microsoft, Google and IBM...what about the rest of the industry? [0] Pro Rata https://www.axios.com/newsletters/axios-pro-rata-ed716a8a-3790-4e1d-8a56-d05db1e4e803.html https://www.axios.com/newsletters/axios-pro-rata-ed716a8a-37...
beerdoggie 7y ago
I was sure it was going to be Matt Levine with a title like that!
buboard 7y ago
This tweet sums it up pretty well, even if you want to replace crypto with PE: "QE turned your savings account into your checking account, the bond market into your savings account, the equity market into the bond market, the VC market into the equity market, and crypto into the VC market. https://twitter.com/joemccann/status/1181582031790067713 https://twitter.com/joemccann/status/1181582031790067713
- CamelCaseName 7y ago
  PE is definitely far more structured and reasonable than the VC market. Holding periods are also much longer for PE than VC, with some holding for 30+ years.
MuffinFlavored 7y ago
I am worried that index funds will stop being one of the only mechanisms the middle class have to build wealth over the next 30 years because technology has made them so easily accessible and everybody is starting to catch on participation wise.
chrisgd 7y ago
The main takeaway is you want to be a PE firm but may not want to invest in them.
H8crilA 7y ago
A good question is what is a retail accessible way to short all this credit that PE firms put on corporate balance sheets. So far the best I could come up with was LEAPS puts on BKLN and maybe LQD, if indeed the credit ratings have weakened and many BBBs are going to get rekd too.

For the lazy/poor: http://archive.is/DJJC5 http://archive.is/DJJC5

wpasc 7y ago
i appreciate the link, was the "lazy/poor" word choice necessary?
- Lammy 7y ago
  I feel like there’s some implicit self-deprecation in their comment considering in order to be able to share it they must have generated the archive link for their own lazy/poor self :)

This page is way too 'big' - if I zoom out to 50% the text is much more readable, but of course that makes it occupy a silly width, and the navigation far too small. Is there a better way to handle (as a user) scaling content? Maybe custom CSS to change the font size that's remembered per domain?

fwn 7y ago
Firefox reader mode does the trick for me. It works that great I usually don't even try to read articles in their newspapers own layout. There's probably a chrome/Safari equivalent.
- OJFord 7y ago
  Thanks, I do use FF, and have used reader mode occasionally (usually on mobile to avoid obnoxious pop-ups or footers when ublock is more of a pain to use) - but what I hadn't found until you commented was the font size, width, line height, and background colour settings. That's pretty great.
gnomewascool 7y ago
In Firefox, in the menu (press Alt if it's not visible by default): View > Zoom > Zoom Text Only and then zoom in/out as you desire. The setting is unfortunately global, so you can't zoom in the page on some sites and zoom in the text on others. (You can toggle the setting, though, and the "zoom amount" is remembered per-site, irrespective of toggling.) There are probably also some extensions that would be more flexible and work on more browsers. (I'm pretty sure that Vimperator (RIP) had an option to separately change text size and overall zoom.)
- OJFord 7y ago
  Thanks, I didn't know about text-only zoom. > the "zoom amount" is remembered per-site, irrespective of toggling. I'm pretty sure it isn't with stock Firefox - I use an extension for that.

StevePerkins 7y ago

To me, the most striking thing in this article ISN'T that there's a vast, opaque, multi-trillion dollar shadow stock market for institutional investors and elite individuals. Instead, it's the fact that over the past 25 years, these vehicles have only managed to beat an S&P 500 index fund by 1-2% after fees. And that over the past 10 years, more than half of them are underperforming a passive index fund. Even if I had a few extra billion dollars lying around, I wouldn't get involved with private equity firms. This audience comes across like a combination of insolvent pension fund managers desperate for a way out, and wealthy individuals who just enjoy the feeling of being in an exclusive club. With dubious "financial engineers" fleecing them all through fees, and hollowing out thousands of private companies to make the whole system possible.

CPLX 7y ago
> I wouldn't get involved with private equity firms The website you posted this sentence on is owned by a private equity firm.
- C1sc0cat 7y ago
  Y combinator is more the VC model that the PE one.
  - elliekelly 7y ago
    VC is Private Equity. All thumbs are fingers but not all fingers are thumbs.
    - mcv 7y ago
      My son has lately been claiming that the thumb is not a finger, and he can explain why. I'm not sure who to believe anymore.
      - severine 7y ago
        https://www.lexico.com/en/explore/is-a-thumb-a-finger https://www.lexico.com/en/explore/is-a-thumb-a-finger

deleted 7y ago

[deleted]

pjc50 7y ago

Private equity is not, in itself, a problem. Leveraged buyouts however are starting to become a serious problem. They allow the hollowing-out of functional but low-profit companies into debt-ridden shells. The most recent example in the news is Pizza Express: what is a restaurant chain doing with £1bn of debt? https://www.bbc.co.uk/news/business-49957551 https://www.bbc.co.uk/news/business-49957551 This is bad for staff and bad for creditors.

barry-cotter 7y ago
It is bad for staff. Working for a company that’s been bought by a PE firm sucks. Almost always layoffs are coming and you’ll have to do more with your resources or more Witt fewer resources. Creditors are lending their own money. If they make a bad bet that’s on them, should have done better due diligence. What PE is good for is increasing economic efficiency more generally which redounds to the benefits of consumers in the long run.
- Blackstone4 7y ago
  Regarding layoffs: "We find that the real-side effects of buyouts on target firms and their workers vary greatly by deal type and market conditions... This conclusion cast doubts on the efficacy of 'one-size-fits-all' policy prescriptions for private equity." [0] Pro Rata https://www.axios.com/newsletters/axios-pro-rata-ed716a8a-3790-4e1d-8a56-d05db1e4e803.html https://www.axios.com/newsletters/axios-pro-rata-ed716a8a-37... It really depends on the PE firm and the company. In the software space, there are large PE firms which have a tendency to cut headcount because in their view, public market CEOs focus on growing revenue at the expense of profitability. This tends to lead to excessive full time employees over and above best practises...so if the previous CEO overhired and the PE firm fired people....then it's the PE firm that's in the wrong right...end of story? I'm not saying you are saying this but this is the underlying vibe I get in these kind of discussions....
travisoneill1 7y ago
Why do these companies somehow deserve to exist? Why can't the creditors make their own decisions on who to lend to and pay the price if they are wrong?

Blackstone4 7y ago

I work in the industry and whilst the article does make some good points, it largely feels like a hit piece focused predominately on the negatives. In a way there is a clear lack of nuance....for instance: "the PE firm and its investors can put in a comparatively small amount of cash". PE deals are typically funded with ~40% to 50% equity with the rest in debt. They are putting substaintial equity into these companies. Secondly, the PE ecosystem is large with a significant number of places with a range of different investment strategies. I don't have the time to make all my points...PE is a lot more gray than the article paints and it's easy to point to the big, evil capitalist who make money and say they are ruining the world... As an example, I've seen private equity save companies. One group acquired a company that was losing millions with a plan to return it to profitability and keep jobs....these kind of deals are never discussed in articles like this because all we hear about are the bankrupticies because they go through court...

notfromhere 7y ago
The PE "fund" puts in 30-50% equity, largely coming out of LP money. The GPs put in 1-2%. So while the GPs act like managers, they have little skin in the game and aren't liable for the debts they rack up on the PortCo. Growth equity has seen some success, but the vast majority of PE activity is based around financially engineering a PortCo to transfer value from the PortCo to the fund, regardless of how it wrecks all other stakeholders or the long-term health of the PortCo.
- Blackstone4 7y ago
  I understand that the majority of equity is coming from LPs but that's not the point I was making. The way the author framed it sounded like the deals were 90% debt and 10% equity which is not the case. It depends on the size of manager and I've seen GP commits range from 1% to 10%. The largest dollar commitment I've seen is in the ~$500m ballpark....either way what matters is whether the GP commit is meaningful in terms of their own net worth due to alignment of interest. Again this is not a black and white issue....some GPs do have skin in the game. Most people do not understand debt including the author...at the moment, debt is so darn cheap, tax-effecient and covenant-lite that it's almost free money.... I would rather be on the equity side of the equation then be a lender....whether that would be a bank or high yield/junk bond investor. I would argue that raising a PE fund is asymmetric for the manager since heads: I earn plenty of carried interest....tails: I get fat from the management fees and hold onto the portfolio companies for as long as I can (~10 years). Which segment of the PE market are you refering to? What do you mean by financial engineering? I've spent a lot of my time in the US LMM and I see plenty of value creation/professionalization of small businesses. That said, I appreciate the fact that that kind of work is harder to do at the larger end...and it's more about the leverage, buying right with the right secular trends etc. Again not black and white.... For example on job creation: "We find that the real-side effects of buyouts on target firms and their workers vary greatly by deal type and market conditions... This conclusion cast doubts on the efficacy of 'one-size-fits-all' policy prescriptions for private equity." If I was to use an analogy with regards to the article, its as if someone tried describing the entire software industry to an outsider by only refering to Microsoft, Google and IBM...what about the rest of the industry? [0] Pro Rata https://www.axios.com/newsletters/axios-pro-rata-ed716a8a-3790-4e1d-8a56-d05db1e4e803.html https://www.axios.com/newsletters/axios-pro-rata-ed716a8a-37...

beerdoggie 7y ago

I was sure it was going to be Matt Levine with a title like that!

buboard 7y ago

This tweet sums it up pretty well, even if you want to replace crypto with PE: "QE turned your savings account into your checking account, the bond market into your savings account, the equity market into the bond market, the VC market into the equity market, and crypto into the VC market. https://twitter.com/joemccann/status/1181582031790067713 https://twitter.com/joemccann/status/1181582031790067713

CamelCaseName 7y ago
PE is definitely far more structured and reasonable than the VC market. Holding periods are also much longer for PE than VC, with some holding for 30+ years.

MuffinFlavored 7y ago

I am worried that index funds will stop being one of the only mechanisms the middle class have to build wealth over the next 30 years because technology has made them so easily accessible and everybody is starting to catch on participation wise.

chrisgd 7y ago

The main takeaway is you want to be a PE firm but may not want to invest in them.

H8crilA 7y ago

A good question is what is a retail accessible way to short all this credit that PE firms put on corporate balance sheets. So far the best I could come up with was LEAPS puts on BKLN and maybe LQD, if indeed the credit ratings have weakened and many BBBs are going to get rekd too.