Thursday, June 20, 2024

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: 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.