Silver Lake CEO Predicts Private Equity “Golden Age”
The CEO of Silver Lake, a large private equity firm focused primarily in technology and growth industries, has a rosy prediction for the near future of private equity. Silver Lake CEO and co-founder, Glenn Hutchins, forecasts “The financial markets may be on the cusp of a new ‘golden age’ for private equity.”
The financial crisis which has brought ruin to many private equity firms and their portfolio companies may now be ending as credit markets open up and the stock markets recover. Hutchins points out some important and promising indicators but he does not provide a clear explanation for why it will be a “golden age” rather than simply a return to average private equity activity. After all, even a very modest recovery in the industry will be seen as a significant improvement but it would still fall short of the boom a few years back.
“Now that the sort of panic of ’08 is over and capital markets seem to be returning to some degree of normality … companies will be able to access debt and equity markets like they have in the past. And that is no surprise,” Hutchins said.
But he added that investors needed to be mindful that valuations in 2007 should not be defined as normal. They were an “overshoot in another way,” he said.
“Now risk premiums are at attractive levels. Investors are being paid to take risk again. That means when you look back on this, when you get back to economic recovery, this will have been a good time to invest,” Hutchins said.
“If you need financial engineering to enter a deal and multiple expansion to exit a deal, then your business is fundamentally challenged,” Hutchins said. Source
Private Equity Industry Video Update | THL Partners
Following yesteday’s look at the “new normal” of private equity, here is a good video update on the private equity industry from a partner at a major private equity firm. The economic recovery is still very shaky and private equity firms and investors are having to decide when is the right time to get back in the market again. Scott Sperling of Thomas H. Lee Partners, one of Boston’s largest private equity firms, says his firm is aggressively looking for new opportunities especially in the services and business outsourcing sector as well as retail but that this recovery is “fragile.” He also mentions the gap in valuation between what the company is valued at in the public market and what private equity firms think it is actually worth. E-mail subscribers can watch the video here.
Companies are still valued higher than private equity firms are willing to pay, and in order to pay 7-9 times cash flow Sperling says he must be certain that the economy is stable. Part of this may be a hope on the buyout side that these companies would be willing to sell for less than they are worth due to economic pressure. Sperling closes with the negotiations between the FDIC and private equity firms and the recent regulation, advocating strongly for lowering the reserve requirement so that private equity firms and their companies are not competitively disadvantaged.
Cerberus is launching two new hedge funds and these funds may bar investors from withdrawing their money for at least 3 years in exchange for lower management fees. Cerberus’ two multi-billion dollar funds will specialize in distressed investments. The use of a lock up period is controversial because investors are unable to take their investment out if the fund starts to do poorly. Yet managers insist that it will be better long-term because it allows a hedge fund to invest without fear that limited partners will take back their pledged capital. Lock ups are employed so that investors do not leave a fund en masse causing it to collapse or sell assets for a low price in a down market. Watch the video here:
This article below was first published on HedgeFundStartupGuru.com. Last week I moderated a panel discussion in new york on capital raising and how starting a fund is really starting a small business. The discussions were great and while everyone knows that capital is hard to raise some good tips and investor feedback came out of the event. We hope to do more of these in the future, stay tuned for Hedge Fund Group (HFG) event announcements for Chicago next month and Moscow, Russia this September. Below please find an article on hedge funds tar
The gyrating financial markets have proven difficult for even the most experienced alternative-investment managers to navigate over the last year, but startup hedge funds and commodity trading advisors now confront an even tougher challenge: convincing investors to entrust them with their money.
In the wake of 2008 – the hedge fund industry’s worst year on record – fledgling funds face gun-shy investors and tougher competition for the assets that are available, amid a fickle market that has made it tough to put up the numbers that made hedge funds famous. Adding to the problem are the effects of … source
Tags: Hedge Fund, Raising capital, capital, hedge funds, private equity, alternative investments, starting a fund, raising capital for a new fund, fundraising tips and advice
This post is being written as part of HedgeFundBlogger.com’s Investment Securities Tool which analyzes the holdings of hedge fund managers. Below are Q3 Holdings details as filed by Lone Pine. These are by there very nature outdated as they represent only some of the hedge funds holding at one point in time.
Please click on the image below to view a list of securities which Lone Pine Capital has purchased since their last filing.
Please click on the image below to view a list of securities which Lone Pine Capital has partially or completely sold since their last filing:
The securities listed within this most recent 13F filings included:
Tags: Lone Pine Capital, Lone Pine Capital Partners, Lone Pine Capital Management, Lone Pine Hedge Fund Holdings, Securities owned by Lone Pine Capital, Stephen Mendel Jr., Stephen Mendel Junior Hedge Fund Manager
Starting a Private Equity Fund in the Financial Crisis
While the current financial crisis has in some ways limited private equity, primarily by reducing a private equity firm’s ability to leverage a buyout, the crisis could also yield huge returns to private equity firms that start funds for buying up profitable assets. Dwight Bush hopes that his new private equity fund will thrive by identifying and purchasing profitable assets at low prices from the government and other funds.
Making the Best of a Bad Situation The financial crisis could be very profitable for private equity funds. At least this is the bet that some investors are making, hoping to capitalize on the weak assets available by fixing them up and selling them for a profit. One such optimist is Dwight Bush, an experienced corporate banker who is setting up a private equity fund, he is also the subject of a recent Washington Post article. One might wonder why he chose this bad economic period to start a private equity fund, or how he plans to raise capital from “cash-strapped” investors and more importantly how he hopes to give his Limited Partners more money than initial investment? Here are his basic answers to these questions:
Why choose a financial crisis to start a private equity fund?
Bush: “What we know is that the last time we had a mortgage meltdown, there were great fortunes made,” Bush said. “In this type of fragmented environment, those people who can identify good assets that are undervalued . . . people like Joe Robert . . . and that can work with those assets over time to help realize their true value” will make lots of money.”
What is his strategy for his private equity fund?
Bush: He said the private-equity fund plans to do two things: manage assets that the federal government buys from banks and buy assets that the “Paulson Plan” auctions, then fix them up and sell them — hopefully at a profit.
Additionally, he hopes to make money of hedge funds dishing out assets at fire-sale prices. Some $43 billion came out of the hedge fund market in September because investors are demanding their money. Bush said hedge funds are selling off quality assets, from manufacturing companies to farmland to commodities, at low prices so they can give cash to their impatient investors.
Okay, sound strategy, but where will the private equity fund get money to buy the assets?
Bush: “Remember one thing,” he said. “Every month, pension funds take in money and pension funds have an obligation to pay their retirees over time. So new capital is available in the market every month and the money has to be put to work.”
What about the private equity buyout model based on leverage in light of the current credit crunch?
“In the short term, private-equity firms will tend to work more with strategic partners, and the assets acquired will be less leveraged,” he said. “Over the long term, you’ve got to remember that banks have to lend to make money and that this too shall pass. My view is that the current situation should reach bottom some time in early to mid-2009, and by 2010 we should have a more robust economy again.”
Dwight Bush presents a strong argument for why private equity can endure the financial crisis with what he sees as eternal investment capital (pension funds) and long-term lending from banks that necessarily lend in order to make money.
Tags: Private Equity, Private Equity Fund, Financial Crisis, Private Equity Funds, Private Equity Fund manager, Dwight Bush, Private Equity and the Credit Crunch, Private Equity Fund Management, Private Capital
This post is being written as part of HedgeFundBlogger.com’s Investment Securities Tool which analyzes the holdings of hedge fund managers.
Please click on the pictures below to view details regarding Greenlight Capital’s Q3 2008 13F Filing:
Built Up Security Positions (click to view): New Security Positions (click to view) No Change to Security Positions (click to view): Security Positions Cleared (click to view) Position Reductions (click to view) Securities mentioned within this Q3 13F Filing:
Below is a press bio on Eurasia, they are the first group to offer a Mongolia-centric hedge fund product. I expect these types of announcements to greatly increase as the barriers to trading in countries such as this drop, hedge funds look for a distinct advantage and traditional “emerging” countries such as China and Brazil fully emerge.
The following piece on Eurasia Capital Management is being published as part of our daily effort to track hedge fund events in the industry. To review other hedge fund related announcements please see our Hedge Fund Tracker Tool
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Eurasia Capital Management plans to increase the world’s first Mongolia-focused fund fivefold to $100 million to tap economic growth fueled by the nation’s mining industry.
Eurasia’s hedge funds, which have about $200 million of investments across Central Asia, also expect to sell shares on London’s Alternative Investment Market or Deutsche Boerse AG by next June, said Alisher Djumanov, managing partner of the Singapore-based firm. Proceeds would be used to start private- equity and property funds, and expand in Central Asia, he said. Mining in Mongolia, which has reserves of coal, copper, gold and uranium, will spur “double-digit” economic growth rates over the next 10 years as commodity prices remain high, Djumanov said in an interview. Mining accounted for about two- thirds of Mongolia’s exports last year, and foreign direct investment in the country rose more than 33 percent.
“The spillover effect from the mining sector will be significant,” Djumanov, 35, said. “We’re investing in companies that are expected to grow significantly on the back of this strong economic growth.” Read more…
Tags: Eurasia Capital Management, Mongolia, Alternative Investment Market, Deutsche Boerse AG , Alisher Djumanov, MSCI World Index,Investments in Mongolia, Mongoalia Investment, Mongolia Investment Fund, Eurasia hedge fund
While this is spun in a neutral or even partially negative way it looks like a positive note to me. Closing at $1B or even less due to operation constraints or availability of investments is common.
The following piece on Thames River Capital is being published as part of our daily effort to track hedge fund events in the industry. To review other hedge fund related announcements please see our Hedge Fund Tracker Tool. ___________________________________
Thames River Capital’s Warrior Fund, a multi-strategy fund of hedge funds, has reached $1.1 billion and is now closed to new subscriptions. The Warrior Fund, which has exposure to directional and non-directional hedge funds such as the Paulson Credit Opportunities fund and the CQS Directional Opportunities fund, finished July down 2.82%, bringing its year-to-date loss to 2.07%.
The fund of funds is on pace to its worst year ever since inception in January 2003. It finished 2007 up 27.35%. “The short term remains choppy but we do believe this is one of the best times to selectively invest given the dislocations witnessed in the financial markets across almost all asset classes and geographical regions,” said Ken Kinsey Quick and Alex Kuiper, co-portfolio managers. Read more…
The #1 reason why hedge funds switch prime brokers is for capital introduction services. Every hedge fund wants to improve and grow their business and the core of prime brokerage services is often seen as a commodity type business, your trades get custodied and executed no matter where you get your prime broker services from.
Many prime brokers are moving from physically offering capital introduction services to partnering with third party marketers or offering a canned marketing plan to hedge fund managers who may not have raised assets before in the past. These packages are popular and should continue to attract new business for prime brokerage firms using these strategies.
Permanent Link: Capital Introduction Services Tags: Capital Introduction Services, Capital Introduction Services for Hedge Funds, Hedge Fund Managers and Capital Introduction Services, What are Capital Introduction Services?
The main problem with capital introductions being made by prime brokerage firms is that many firms are not competitive enough to market. Many managers with negative or sub-par performance would still like to grow their business but the fact is most investors won’t consider hedge fund managers who are both relatively small and have mediocre or poor performance, there is nothing engaging enough that will convince investors to look past those two facts, they hear hundreds of stories and see as many teams pitching their outlook on the markets each year.
This leaves prime brokerage firms with two choices – offer capital introduction services knowing that there is almost no chance of raising assets or tell the hedge fund manager that they will not be able to market their strategy. The best prime brokers will often help with pre-marketing activities such as operational and risk assessments, marketing material scrubbing, newsletter development, etc.
This may seem straightforward but it is often an unsaid thorn in the side of prime brokerage firms offering capital introductions for hedge fund managers. They want to provide this service to everyone possible but by nature only 10-25% of all clients really qualify for the service.
Permanent Link: Capital Introductions Tags: Capital Introductions, Capital Introduction, Capital Introduction Services, What are Capital Introductions? What is capital introduction? Tips for capital introduction work for hedge fund managers?
The following piece on Cinven is being published as part of our Private Equity Tracker Tool, our daily effort to track private equity firms in the industry. Cinven is a European buyout firm founded in 1977.
Resource #1:
Cinven, the private equity house based in London, faces one of its biggest losses after lenders seized control of its Spanish hospitals portfolio.
The firm lost most of the €175 million (£154 million) it invested in the buyout of USP Hospitales after Barclays and Royal Bank of Scotland took 90 per cent of the struggling hospital group in a debt-for-equity swap.
Cinven ruled out injecting more cash into the hospital operator as part of a debt restructuring. Barcap, the investment banking unit of Barclays, and RBS now own about two thirds of the business and in return have cut the group’s debt from €500 million to €250 million.
The rest of the equity is owned by USP’s management.
The following piece on General Atlantic is being published as part of our Private Equity Tracker Tool, our daily effort to track private equity firms in the industry.
Resource #1: US-based private equity (PE) major General Atlantic is learnt to be final stages of talks with Wockhardt Hospitals to invest around $140-150 million. Although there are some differences over the valuation and structure of the investment, the PE may pick up around 20% stake in the Indian company, sources said.
The hospital chain has been in talks with several PE funds after its initial public offer (IPO) got derailed earlier this year. Talks with most PE funds had also fallen through over differences about the company’s valuation, PE sources said. When contacted, a Wockhardt Hospitals spokesperson said: “We don’t comment on market speculations.”
Tags: General Atlantic, General Atlantic investments, General Atlantic holdings, General Atlantic wealth management, investors, limited partners, capital, managers
The following piece on CQS is being published as part of our daily effort to track hedge fund events in the industry. To review other hedge fund related announcements please see our Hedge Fund Tracker Tool. ___________________________________
Resource #1: (3.18.09) Quantitative hedge fund shop CQS founder Michael Hintze is getting some help running the firm.
The London hedge fund has named Grant Thompson to serve as joint CEO, alongside Hintze. Thompson will be based in New York, where CQS is hoping to expand its business. source
Resource #2: UK hedge fund manager CQS said on Thursday it had launched a new fund that will aim to profit from the volatility that has gripped global stock markets for much of the past year. CQS, which had $9.6 billion of assets under management at the start of August, said it had launched CQS Global Volatility Fund with an initial size of US$160 million.
The fund will use futures and options to trade volatility, with a primary focus on equity market indexes and on individual equities within the world’s major stock markets.
“The Fund aims to profit from valuation anomalies in equity volatility and from dislocations in markets. CQS believes that equity market volatility provides a consistent opportunity set to capture profits for investors,” CQS said in a statement.
The UK firm said senior portfolio managers Andrew Song and Amir Kooros will lead a team of 9 derivative investment professionals. Read more…
Below please find the Family Offices Profile for Wallace Foundation. If you need contact details for this family office please refer to FamilyOfficesDatabase.com
This family office profile is currently being constructed, please check back later this year for more details.
Tags: Wallace Foundation, Wallace Foundation family office, Wallace Foundation investors, Wallace Foundation investments, capital, Wallace Foundation holdings
An agreement in which one party, for an up front premium, agrees to compensate the other at specific time periods, if a designated stock market benchmark is greater than a predetermined level.
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