Private Equity Golden Age

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

Read more about Silver Lake at our Private Equity Tracker profile.

Popular private equity articles:

1. Private Equity Tracker Tool
2. Alternative Investment Jobs
   
3. Career Guide
   
4. Service Provider Directory
5. Private Equity Associate
   

Tags: private equity golden age, private equity industry, private equity investments, private equity silver lake, private equity holdings, prediction, industry, assets, capital, investors, 2009, buyouts

Private Equity Contributions

List of Private Equity Campaign Contributions

The relationship between private equity firms and elected officials in charge of pension fund asset allocations has developed into a bit of controversy. The spotlight came with New York Attorney General Anthony Cuomo’s state pension fund probe focusing on the use of placement agents and the fees paid to these intermediaries by private equity firms.

Now a newspaper has put together a list of private equity firms and their campaign contributions to politicians. In several cases the official seems to have direct influence on who receives investments from the state’s pension fund. The list also includes hedge funds and other investment firms but is largely comprised of private equity firms all totaling in 515 contributions since 1996. To see the list of each contribution and who it was for and what firm donated the funds please visit here.

The high contributions to influential politicians seem to have been rewarded in some cases with large investments in private equity firm, although it’s impossible to know whether the firm would have received the capital regardless of the contribution. Here are some of the more notable contributions:

• One-time presidential hopeful and now Governor of New Mexico, Bill Richardson, received $20,000 from the founder of Quadrangle Group in 2002 and 2006. Richardson is on the New Mexico State Investment Council and although he was absent for the vote, the investment council awarded Quadrangle with a $20 million investment in 2005. This investment returned about $1 million in management fees for Quadrangle.

• It’s not that surprising that the Carlyle Group is on this list considering the firm is based in Washington, D.C. although it was an elected official in New York receiving the money. Carlyle’s co-founder and managing director, David Rubenstein, gave $48,000 to Alan Hevesi’s successful bid for New York state comptroller from 2002-2006. In turn, Carlyle manages almost $1.5 billion in state pension fund investments allocated since 2003, generating $38.6 million in management fees for the private equity firm.

• Another of the big private equity groups, Blackstone Group, gave to Governor Ed Rendell of Pennsylvania. Stephen Schwarzman, chairman of Blackstone Group, contributed $11,000 to the governor’s campaigns in 2002 and 2006. Coincidentally (or not) Gov. Rendell appoints six of the Pennsylvania pension board’s 11 members who decide what firms receive investments. From 1994-2007 Blackstone Group has received $2.8 billion from the state pension fund netting Blackstone $129 million in fees.

Source: New Mexico State Investment Council, New York State Office of the State Comptroller, Pennsylvania State Employees’ Retirement System, USA TODAY research

Popular private equity articles:

1. Private Equity Tracker Tool
2. Alternative Investment Jobs
   
3. Career Guide
   
4. Service Provider Directory
5. Private Equity Associate
   

Tags: Private Equity investments, pension funds, campaign contributions, campaign donations, private equity managers politicians, politics, political contributions, investments from pension funds

Private Equity Food

Private Equity Food Firms Survive the Recession

Here is a brief video about private equity investment in food, specifically “cravable” cheap eats like Cinnabon. Roark Capital owns a wide variety of inexpensive food vendors such as Cinnabon, Moe’s, Schlotzsky’s, and McAlister’s Deli. The following is an interview with Neal K. Aronson, managing partner at Roark Capital where he gives his perspective on the recession. Mr. Aronson is pretty optimistic as it seems his food companies are performing fairly well in the recession.

Popular private equity articles: Private Equity Food

1. Private Equity Tracker Tool
2. Private Equity Real Estate
3. Private Equity MBA
4. Service Provider Directory

Tags: Private Equity Food, Private Equity investments, Private Equity investing in food, cinnabon private equity, buyout moes, buyout cinnabon, Roark Capital

Private Equity Fund Investors

Barometer of Private Equity Fund Investors

Three quarters of private equity investors expect distributions in their portfolios to decline in the next year. This is the most pessimistic estimate since the Global Private Equity Barometer began surveying limited partners in 2004. Private equity investors expect to net considerably less returns on investments. The report found that 37% of limited partners now report overall net returns of 16% or more from the asset class, compared with a high of 45% of LPs in Summer 2007.

The most troubling finding, I thought, was that “for the first time in years, a significant number of private equity investors are planning to decrease their target allocation to private equity – 20% of LPs plan a reduced allocation in the coming year.” That compares to about 3-6% in previous Barometers. On the flip side, private equity investors remain committed to the asset class generally. 80% plan to maintain or even increase their target allocation in the next 12 months. However, the expected flight of LP’s from private equity is worrying for private equity firms fundraising.

General Partner-Limited Partner Relations

One third of limited partners expect to reduce their number of general partner relationships. Similarly, 84% of limited partners have declined to re-invest with one or more of their existing GPs over the last 12 months–almost twice the number of LPs who refused re-investing in the summer of 2005. This suggests a major decline of investor confidence in their general partners.

Many limited partners appear to be using the economic downturn to their advantage, seeing the poor performances by many private equity funds as a bargaining chip in negotiating terms. “Around four fifths of LPs believe the terms and conditions of buyout funds worldwide will become more favourable to them over the next two years. Two thirds (65%) of LPs foresee more
favourable fund terms for venture funds.” Also, about a tenth of private equity limited partners are expected to default on capital commitments–with defaults concentrated mostly in North America.

For the full report click here.

Tags: Private Equity Barometer, Private Equity Fund Investors, Private Equity Limited Partners, Private Equity General Partners, Private Equity Partners, Private Equity investments