Women's Soccer: PEU Pioneers

Who'd have thought equality oriented women's soccer would be the first professional league to embrace private equity underwriters?  Semafor's Liz Hoffman hosted National Women's Soccer League Commissioner Jessica Berman.  Hoffman wrote: 

We talked about the influx of Wall Street money into sports in general and NWSL in particular, which was the first major sports league to allow institutional investors to control teams. “We have to be very cautious and careful [but] I’m obviously a fan of it,” she said, singling out Sixth Street, which owns San Francisco’s Bay FC through its evergreen fund. A sports team “is not something that you hold for five years and expect to make money,” she said, “and that requires a different kind of investor.”

The greed and leverage boys aren't known for sharing their winnings with anyone other than limited partners.  Actual employees of PEU affiliates have shared the short stick that comes with deal fees, management fees, drastically higher interest expenses and special distributions.  That is if they keep their job after the PEU job shedding (initial and subsequent rounds).

Sports is the perfect investment for those obsessed with winning in the financial world and willing to invest heavily in politicians to tilt the economic table for maximum PEU advantage.  The Carlyle Group located in Washington, D.C. for this very reason.  Carlyle invested in Seattle's Reign.

Women's soccer, college sports, NBA, MLB, NFL, NHL and even Cricket want access to PEU money.  Players will experience owners gunning for return on equity (ROE).  They may rue the day the greed and leverage boys came to play financial hardball.

PEU Arrogance Beyond Comprehension: Alaska Big

Stories regarding billionaire families hit the news recently.  The first involves Carlyle Group co-founder David Rubenstein and his daughter Ellie who serves as Vice Chair of the Alaska Permanent Fund Corporation board.  Ellie Rubenstein, like her infamous father, is a private equity underwriter (PEU).  The Alaska Permanent Fund Corporation has $800 million invested in Carlyle's private equity funds.

Upon her July 2022 appointment to the APFC board the organization announced:

As CEO and Co-Founder of an investment firm, Trustee Rubenstein brings extensive private equity, investment management and corporate experience to the Board. Trustee Rubenstein also supports numerous organizations and initiatives through her family office and dedicates countless hours volunteering with the Red Cross of Alaska. 

“The Alaska Permanent Fund is a globally recognized sophisticated investor. I am humbled and honored to serve on the Board. I look forward to getting to know the Trustees and Staff and working with them in service to the people of Alaska.” ~ Trustee Rubenstein

Ellie Rubenstein wants the fund to reach $100 billion by expanding investments in private equity, which sits at 16% of fund assets.  

Background set.  Emails reveal a strange set of interactions from a board Vice Chair.  

“As we all know she has made dozens upon dozens of investment manager referrals in her 18 months on the APFC board. Many of these have been in the private credit space and my team has declined to pursue all of them.”

Those referrals included TCW (Carlyle), Churchill Asset Management (formerly owned by Carlyle) and Goldman Sachs private credit.  Several of those firms have stakes in Ellie's Manna Tree.

The board Vice Chair did more than cross the conflict of interest line.  She targeted APFC staff, saying her infamous father was "not impressed" with a staff member.  I thought  David Rubenstein was affable and took a personal interest in people he met.  Churchill's CEO said this in a 2022 interview:   

Who leaves their mentor after three short years?

Back to the unimpressive junior staffer.  Apparently father Rubenstein was miffed that the Permanent Fund didn't send more "senior people" to hear his sales pitch.  How lucky he had his board appointed daughter to deliver that message.

The Vice Chair targeted another staffer in private credit for being "like 25."  That person had ten years tenure with the "globally recognized sophisticated investor."  

This PEU apple fell directly under the tree.  Flashback to 2011:

I watched a video interview of (David) Rubenstein and his arrogance is really beyond tolerance. He was going on about the debt ceiling problem and how there would need to be cuts in services and higher taxes. When the reporter asked him about tax on carried interest he turned really disdainful and said that this "only" amounted to $22 billion over some number of years and this was not serious money. Boy, nothing like everybody doing their small part to save the country from oblivion!

That not serious money ended up being $1 trillion in accumulated carried interest.

Ellie also implied that she would soon be top dog on the APFC board as the current chair "would not be reappointed."    

"Arrogance beyond tolerance" birthed "arrogance beyond comprehension."  Welcome to our PEU world which brings us to our second billionaire family story.  Four members of Britain's wealthiest family were convicted in Switzerland for exploiting staff.

How would you like $8 pay for an 18 hour shift?

Switzerland had the guts to do what most countries won't, charge the super rich, politically connected for crimes committed.  

The "jury is in" in Geneva but remains out regarding the Alaska Permanent Fund Corporation.  Will investigating attorneys go after the leaker(s) and ignore powerful bad actors (as so frequently happens in the U.S.)?  Stay tuned.

There is one final commonality between the Rubenstein's and the richest family in Britain.   David Rubenstein coined "patriotic philanthropy" and the Hinduja Group's core value is "work to give."  Odd that these givers do so much taking.

Politicians Red and Blue love PEU and increasingly, more are one.  Those who make laws are often loathe to enforce them, at least within their circle.  

Update 6-25-24:  Members of the public were able to view the Executive Session where the board discussed the leak controversy.  

Rubenstein, who remained quiet during the public portion of the meeting, became animated during executive session,...

...at one point APFC CEO Deven Mitchell and Scott Balovich, the head of IT for the APFC, were asked to leave the executive session at the request of Rubenstein.   

...the meeting was intensely focused on identifying the source of the leak. 

Rubenstein expressed concern about staff making “unchecked allegations.”

She went on state that there had been no head of private equity for nine months, and that the CIO had worked to undo relationships.

Translation:  Bad news for the little people.

News stories show the Alaska Permanent Fund employing leverage to juice returns, a signature PEU strategy.  Also, Ellie Rubenstein spoke at this year's FII Conference in Saudi Arabia and shared the APF's future strategies (not all of which were endorsed by the APFC board).  The moderator introduced her as an LP with the Alaska Permanent Fund.  Odd.  

During the FII session Ellie shared her personal health concerns that led her to invest in firm working to improve infant gut health.

Update 6-26-24:  Citadel's Ken Griffin reached a settlement with the IRS after a leaker revealed his preferred tax status.  The leaker got five years in prison.  Will David Rubenstein be as successful in defending his daughter?

News of  the Griffin settlement came from "a person familiar with the situation who asked not to be identified discussing confidential information."  In other words, a leaker.  It all depends on who you serve.  

The billionaire boys know how to play the system because they are ever redesigning it to their advantage.

 

Update 7-21-24:  Board chair Ethan Shutt was reappointed by Alaska's governor, thus ending any immediate rise by the younger Rubenstein.

Update 8-11-24:  Ellie Rubenstein resigned from the Alaska Permanent Fund board.  She referenced the time consuming nature of APF board service in order to make the organization more professional.  Chris Ullman, former Communications Director at The Carlyle Group, served as Ellie's spokesman.  Ullman also hangs a Declaration Partners shingle, according to a recent press release.  The insider money funnel is good to Chris as he has his own communications firma and is a senior advisor to Narrative Strategies.  

Chris whistled the National Anthem at a Baltimore Orioles home game in early June.  Ellie's father recently purchased the Orioles.  Lead owner David Rubenstein co-founded The Carlyle Group before establishing his Declaration Partners family office.  Declaration now competes with Carlyle by soliciting investor funds and doing deals.  Ellie resigned from the APF board so she could spend more time on her PEU, Manna Tree.  Her father is an investor in Manna Tree.  It sounds like a conflict of interest soup.  

Ullman said, “Ellie has concluded that the scope and pace of change necessary to fully institutionalize the Permanent Fund are not compatible with the demands of leading her private equity firm.”

Fully institutionalize?  Nice dig on the way out.

Of course she had the gratitude of new board officers for her fine work as a board member, even as Vice Chair Ellie Rubenstein was slated to assume the Board President role.  There are no conflicts of interest in PEU land, just personal connections that provide insiders multiple full time job incomes for doing part time work.    

Update 10-17-24:  Fortune ran a story on Churchill Asset Management and its divorce from Carlyle.  Churchill celebrated ten years of freedom from Carlyle chains.

Carlyle Goes After Mediterranean Oil & Gas

The Carlyle Group's latest energy deal has the private equity underwriter (PEU) acquiring Mediterranean oil and gas assets from Energean.  The deal is expected to close later this year.

Carlyle has done a number of oil and gas deals over the years.  It hired two former BP CEOs, Lord John Browne and Tony Hayward.  Hayward will head up Carlyle's new Mediterranean venture, in addition to serving as Executive Chairman of Carlyle's Colombian onshore energy venture SierraCol.

Hayward headed a cost conscious BP during the Gulf of Mexico Oil Spew, while Lord John Browne slashed maintenance costs prior to the Texas City refinery explosion.  

Carlyle employed Browne at Riverstone and Hayward at SierraCol.  The public can rest easier knowing the two men "got their life back" after their respective horrific disasters.

Carlyle's Mediterranean energy venture will target offshore oil and gas fields.  This is likely a 3D chess move for giant fields off Israel/Gaza/Lebanon and elsewhere in the Mediterranean. 

Update 10-25-24:  Reuters reported: 

Energean has added a second oil production unit to a floating production vessel off Israel which is set to boost its crude output by up to two-thirds in the coming months.  

....increase oil production to 20,000 to 25,000 barrels per day, from around 15,000 bpd today.

Production at Karish, which is close to Israel's maritime border with Lebanon, has been largely uninterrupted since the start of the Middle East conflict on Oct. 7. In July, the Israeli military said it had shot down a drone launched from Lebanon which it said was heading to the Energean FPSO

Drink from the PEU LP Cup?

Motivation guru Tony Robbins partnered with a firm that sells secondary private equity stakes from limited partners wanting an exit.  That partnership produced the book "The Holy Grail of Investing."  So what's going on with limited partners (LPs) and why do they need to flip their private equity holdings?  There has been a dearth of returns since 2022 and LPs want their principal plus profits.

Axios reported:

Private equity's exit drought has led to a record number of dividend recaps, which is when PE funds pay themselves to kick the debt grenade down the road and into a storm drain

A Bloomberg story echoed the practice.  The issue is PEU asset valuations.  There is a discrepancy between private and public market valuations.

My wise friend offered:

Valuations?  LOL.  There are no principles dealing with principal 

There's more to know about being an LP.

Private equity underwriters (PEU) charge fees on committed capital, not just the amount deployed.  Institutional Investor reported:

...travel related to sourcing deals, networking, and preliminary due diligence should be paid using the management fee. According to Preqin’s data, just 8.2 percent of the funds it looked at were compliant with this principle.

My retirement account could fund PEU private jet travel?  Sign me up as extremely uninterested.

"The Holy Grail of Investing" website  offered:

My wise friend recently offered:

Former Fed Chair Alan Greenspan set the stage for the greatest concentration of wealth for the billionaire class via a policy mistake. Wasn't he part of the dream team, the infamous committee to rule the world with the likes of Robert Rubin and Larry Summers? The Champions of removing Glass Steagall 

That foamed the runway so his successors could move the monetary needle to create MORAL hazard passes for the most monied cl-asses. The same conductor that believes self regulating organizations are a good thing to prevent fraud and now all we have is fraud. And the bigger the fraud the bigger the payout. What an era/error? 

When I make mistakes it has a real cost. That's why most of us don't take on terminal risk because we want to fight another day.  Not the billionaire Boy Club. They get to socialize their risk and expand on the backs of many. They knew what they were doing all the time. 

Money is political. There are no Ned Starks, i.e. people that die on their principals, only a lot of little fingers that run houses of ill repute. They will make deals with the devil to get their hands on a bigger piece of the pie. The public be damned.  There is nothing normal about the distribution.  

There are no principles in dealing with principal.

Very well said.  Drink from the PEU LP cup at your own risk.

Bloomberg on Our PEUture

Three Bloomberg stories portend a future of scarcity (Bitcoin), secrecy (private equity) and absurdity (artificial intelligence).  The Bitcoin halving story indicates more electrical power will be needed to mine new Bitcoin.  Great, a non-currency capable of a small number of transactions becomes more inefficient to generate.    

Bitcoin's future is in the hands of the crypto lobby, which somehow arose en masse from FTX's burial crypt to storm Capital Hill.

The Great Huckster said he wants to the Crypto President and have all Bitcoin mined in the U.S.  Flashback to 2019:

“I am not a fan of Bitcoin and other Cryptocurrencies, which are not money, and whose value is highly volatile and based on thin air.  Unregulated Crypto Assets can facilitate unlawful behavior, including drug trade and other illegal activity.”

My wise friend noted crypto's use of the private equity playbook, the subject of the second video "How Private Equity Ate Britain."

If you think about it and go back 30 years, the Crypto Industry is using the same playbook as private equity. They used payoffs, consultants, lobbyists, capture, etc. to infiltrate the pension system and this is exactly what Crypto is doing.

It doesn't matter if it's a good asset or not. They want what they want and they'll get it.

My pet name for the greed and leverage boys is private equity underwriter (PEU).  The PEU infestation grew to the point someone noticed and made a Bloomberg video.  It's rather unappetizing.

Private equity has its sights set on professional sports, equity stakes in major college conferences (CVC and the Big12) and virtually anything a consumer spends their hard earned money on.  If you buy or rent it, they want to lever that asset, fee it up long term and flip it for massive gains.  Don't ask them to share their fee structure, it's a bleeping national secret.  

That leads us to our next video, an interview with an early visionary of artificial intelligence (AI).  Jaron Lanier excoriates social media for the damage it's done to individuals and society.  He's optimistic artificial intelligence will deliver something better.  He does recommend people ask AI where they got their information.  Knowing sources helped him understand when AI came in from left field.  

Neural networks learn from trial and error.  The sad thing is AI will learn from politics, a body known for manipulating, distorting and outright unethical behavior.  If the aim is to win, then anything goes.  Given the harms social media has done to society, I have no desire for AI to create a much bigger wake.  

Like Bitcoin, AI is expected to increase demand for electricity.  Rest assured they will lock up electricity at decent prices for a long term.  That leaves the little people to pay the full freight for new infrastructure.  Once again the monied get the subsidy.  The common person is on their own.

FT ran a story on preferred PEU carried interest taxation.

"Private equity firms have amassed $1 trillion in ‘carry’ fees as taxation debate mounts" 

In the US, recent presidents, including Barack Obama, Joe Biden and even Donald Trump vowed to end the special tax treatment but ultimately retreated.

Politicians Red and Blue love PEU and increasingly more are one.  The game is afoot and the worst of us wants to win.

Greed Making World Unmanageable

UnHerd reported Twitter founder Jack Dorsey saying social media is robbing us of free will:

“We are being programmed based on what we say we are interested in,” he said. “As we engage and interact with this content, the algorithm continues to build more and more of this bias."

CNET reported on artificial intelligence (AI) and its ability to cause harm:

"AI companies possess substantial non-public information about the capabilities and limitations of their systems, the adequacy of their protective measures, and the risk levels of different kinds of harm," they wrote. "They currently have only weak obligations to share some of this information with governments, and none with civil society. We do not think they can all be relied upon to share it voluntarily."

Among the possible harms: entrenchment of existing inequalities, an increase in misinformation, and the "loss of control of autonomous AI systems potentially resulting in human extinction."

Dorsey shared his concerns about social media manipulation:

"It’s effectively a black box — you can’t predict how it’s going to work or what it’s going to show you.”

And AI is a black box of much greater magnitude.

Dr. Edwards Deming, noted management theorist, stated in his last interview:

Any decision that management makes, that anybody makes for himself or for other people, is prediction. The simplest plan is prediction, with a chance to be wrong. How may I get home tonight? I predict that my automobile will start and run, or that the bus will come, or that the train will come. I make plans. Those plans are predictions. Management is prediction; our lives are prediction. We predict what will happen. We try to choose a course of action that will react in favor of us. That's our aim. We predict the consequence of actions.

Robbed of free will and unable to predict?  There would be lots of suckers to fleece.

And what's being sold to the manipulated masses?  Cryptocurrencies, private equity and AI.  They're all high tech pick pockets and care not if its your wallet or your will.  They may just take both.

Beware the social media bump and lift, the AI fast one, fraud based crypto and the PEU bunco.  What's predictable?  The rich will get much richer, the powerful will become even more powerful as the choreographed dance between them becomes more dysfunctional and distorted. Our leaders have no intention of protecting citizens.  You are on your own.  

Greed is making the world unmanageable.

CEO Pay Nearly 200 Times that of Median Worker's

CNN reported:

The median CEO in the S&P 500 was paid 196 times as much as the median employee in 2023, according to an analysis by Equilar and The Associated Press. That’s up from a ratio of 185 in 2022.

CEO pay — which is closely tied to share prices — is rising notably faster than that of employees. Many workers, in fact, are struggling to keep up with the cost of living.

The annual pay hike amounted to about $4,300 for workers. For CEOs, it was an extra $1.5 million.

The story share legendary CEOs making 510 times to 672 times their company's median salary.  Everything is outsized in our PEU world.

The piece noted employees are likely frustrated over these obscene pay differentials.  At least it didn't call the workers lonely or disgruntled.  

Greed is insatiable.  

Greed is not only associated with immorality and unethical behavior in philosophy and religion, but has also been considered to be a cause of many financial problems and scandals

Share prices....Yes.  Many can recall CEOs cheated by backdating stock options under the "most pure of incentives."

Version One of the scheme had executives changing the date on the option to match the lowest stock price of the period.  Version Two had the stock price manipulated lower on the date of the option grant.

Those under greed's spell will never stop.  An ethical life is its own reward.

Carlyle to Again JV in UAE?

Carlyle Group co-founder and founder of family office Declaration Partners David Rubenstein met with official in the United Arab Emirates regarding partnerships with the storied private equity underwriter (PEU).  Carlyle, a politically connected PEU based in our nation's capital, was once part owned by an Abu Dhabi based sovereign wealth fund.  

Mubadala purchased a $1.35 billion chunk of Carlyle in 2007 adding another $500 million in 2010.

Rubenstein's history in the country facilitated the exchange of compliments between the parties. 

The First Deputy Ruler of Dubai spoke to their innovative public-private partnerships (several of which have been with Carlyle)..  He highlighted Dubai's business friendly environment and government sponsored growth.  

 

The Carlyle Group is legendary for taking advantage of both.  It's in their DNA.

 

Update:  Mr. Rubenstein has yet another investment connection to the UAE.  Paxos, a Dcclaration Partners holding, will offer its yield generating dollar "Lift" stablecoin via the Financial Services Regulatory Authority (FSRA) of Abu Dhabi Global Market.  That deal was announced on Thursday.  UAE is open for greed.

SPEURTS is All the Rage

Private equity underwriters (PEU) are now investing in sports.  What can a 60 something year old billionaire not do?  Take Carlyle Group co-founder David Rubenstein.

He can rap.

Carlyle owned music rights for the most popular singer on the planet.

He is the new majority owner for the Baltimore Orioles.

Carlyle has a stake in the Seattle Reign (women's professional soccer).

The NFL just postponed a vote allowing private equity investments in professional football teams.  

It's coming.   

Since 2019, there have been at least 20 private equity investments in major league sports teams, according to Kyle Walters, associate analyst, private equity at PitchBook. Sixty-two major North American sports teams, valued at $179.7 billion, have “connections” to PE.

The NFL has experience with owners having a greed and leverage background.

Carolina Panters owner and billionaire David Tepper threw a drink on a Jaguars football fan. The NFL is aware of the video.

The English Premier league has a number of storied teams under PEU ownership.  A Chelsea soccer fan lamented private equity's impact on his beloved team and the departure of an experienced coach.

..when Private Equity Demons force reasonable people out of their jobs, the wheels start to fall off. Or get stripped off. 

If it’s possible to mathematically win just enough games that the team is a return on investment, or to buy enough success that everyone shuts up about the brutal backroom dealings that squeeze beloved players out, they’re going to do it. And in the meantime, they’re all so convinced that they’re the only rich smart ones in the room that they’ll blame every failure on someone down the chain. You’ve heard this story before. Most of you have lived it. I certainly have, but I wish I didn’t have to be reminded of it every time Chelsea goes down two-nil to fucking Brentford.

777 Partners, an early PEU buyer of professional sports teams, recently "missed a £250,000 payroll at its British basketball team it owns" (Semafor) 

Minnesota Timberwolves ownership is the latest PEU battle in the NBA.  The Carlyle Group and Blue Owl Homecourt were "lined up" to provide financing for Alex Rodriguez and Marc Lore but neither came through.  The deal is headed to arbitration with Mike Bloomberg joining the ARod/Lore team.  It remains to be seen if any new billionaire owners will push for a new stadium (with massive public subsidies).

The PEU boys ran Toys "R Us, Manor Care, Steward Health. BeautyCounter and Red Lobster into the ground.  Let's see what they can do for professional speurts in their ceaseless pursuit of outsized profits (profitgasm).   

Update 6-9-24:  Barron's ran s PEU sports story.

 

As did Global Finance.

Rolling the Rock for Retirement Plans

"Sisyphus’ harsh punishment of an eternity of fruitless labor was well deserved for his life full of evil and trickery."

Retirement plans are the result of a lifetime of labor and two groups want in, private equity and crypto, aka "digital assets."  Private equity stakes have been called the Holy Grail of investing.

Big returns for decades, who wouldn't want some of that?  First, Tony Robbins wants you to buy secondary private equity stakes, those sold by limited partners who want out.  The first leg of big secondary returns is driven by a simple wave of an accounting pen.  

The second wave may not come for a while, according to one high placed private equity underwriter (PEU).

Those Holy Grail returns are gone for now and that's just the reality of where PEUs are.  Crypto is also calling.  The low rumble began after FTX's implosion in November 2022 

Many private equity founders have gone on to create their own family office, sort of a personal PEU and they are betting on crypto.  

Carlyle Group co-founder David Rubenstein has a family office, Declaration Partners.  It has a stake in Paxos, a cryptocurrency play.  Paxos announced yesterday:

 I believe lift is synonymous with pick-pocket.  

Evil and trickery want in your retirement account.  Elected officials have catered to the PEU class and offer no protection from skilled financial predators.  They do provide unparalled access, preferred taxation and significant resources from Uncle Sam's wallet.

Politicians Red and Blue love PEU and increasingly, more are one.

Update:  FN reported from SuperReturn on PEUs selling secondary stakes:

“Distributions to paid-in capital will naturally be the most significant metric that investors are focusing on. In the first half of the year, we have seen a number of GPs looking to raise DPI through the secondary market, and in particular the growth in the use of single asset continuation funds, a trend we expect to continue.

Update 6-12-24:  WallStreetonParade clearly outlined the danger from cryptocurrencies.  Bloomberg reported on PEU peril.

Update 8-3-24:  BlackRock's Larry Fink flipped on cryptocurrencies, now calling them legit.  He did so after the Trump assassination attempt.  In a strange multiverse development, the shooter appeared in a BlackRock ad.