Wednesday, January 13, 2010

Mega PEU's Brutal 2009: Average 31% Loss

For the year ended June 2009 large private equity funds bled badly, losing 31.4% of investor money. This left a bad taste in investors' mouths. Smaller funds performed better. CFO reported:

The one-year performance of mega-funds is making investors wary. In a separate study in December, Preqin found that limited partners were less keen to invest in mega-size funds. Of the 100 investors surveyed, 37% said they would be avoiding mega-buyout funds after having previously invested in them, and only 9% said they would be investing in such funds this year.

The customer is a quick judge. Are "limited partners" the same professional investor Goldman Sachs CEO Lloyd Blankfein blamed in his commission testimony? Goldman packaged junk credit securities because customers demanded it. It then shorted those instruments.

Greed lives in the private equity underwriting (PEU) world. The question is what impact it has on client memory.