10+ hours of podcasts, in 5 minutes.
15 quotes from 1 episode on Private Equity Funcast, each with a timestamped link to the source.
Andrew Akers attributes private equity outperformance to high debt levels and heavy technology investments. Buyout funds carry up to 2.5 times debt compared to public company averages.
Internal rate of return metrics offer zero predictive value for funds younger than five years.
“We actually don't really put any stock in a preliminary IRR of a fund that's younger than five. Like it's just not very predictive.”
Operational improvements play a minor role in driving overall fund performance.
“I think the the market as a whole the operational alpha if you will is kind of a less important driver to performance than I think the industry would care to admit.”
Middle market funds have maintained strong returns without performance issues for over a decade.
“For the last 10 plus years, the middle market doesn't have a performance problem.”
Buyout funds carry up to 2.5 times debt compared to public company averages of 1.5 times. A decade-long overweight position in technology assets generated the bulk of the financial gains for these funds.
“They've been heavy in tech for the last 10 plus years. That bet for the most part has has paid off.”
“You're looking at like two to two and a half times leverage on your average buyout fund versus your public market portfolio embedded in companies is probably more like 1.3 to 1.5 times…”
Global private equity assets will approach $9 trillion by 2030. The top 5% of funds capture 60% of all capital, representing fewer than 100 unique investors raising money every few years.
“Well I think the first point which is no surprise is we're forecasting global private equity AUM to be almost 9 trillion by 2030.”
“In this 2020 chart, we're talking about the 60% based on the top 5%. That's about 150 funds overall in that six years and that's less than 100 unique investors, right? Because these funds are also raising at a clip of about three to four years right now.”
Creating an index of private markets introduces structural risks. Data and academic research confirm that a broad allocation across all funds fails to reliably outperform public market benchmarks.
“When we start talking about the indexing private markets as a product is where kind of the red flag starts to raise for me…”
“I think most of what our data shows and a lot of the academic research now shows is that if you just blindly allocate to all funds even if it was feasible across private markets it hasn't necessarily been that much of an outperformer relative to public markets if at all…”
“And depending on whose capital market assumptions you look at, and when I was on the consulting side, ours was actually a bit lower than this…”
“We've seen that's actually reached a peak recently where most buyout is tech…”
“And what you're left with, right, is a lot of leveraged equity risk and security selection…”
“So starting to kind of paint a picture of these look a lot more like levered growth funds than I think what you would think of when you say buyout equity.”
“My old CEO CIO had a line. He says, 'It's not what it is, it's what it does.' Which sounds kind of obvious, but we go back to these talking about these large private equity. Okay, it's equity. is private equity, but what what does it do to your portfolio and what type of exposures?”
“And then two on the passive side, passive means to me lower fees…”
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