David Toll

Jason Thomas is joining The Carlyle Group in the next few weeks after nearly three years at the Private Equity Growth Capital Council, most recently as vice president of research, peHUB has learned. Thomas is slated to become director of research at Carlyle, where he will be the first to hold that position, according to spokesperson Christopher W. Ullman. He will report to David M. Marchick, who is managing director and global head of external affairs, a group that handles communications and government relations for the firm. Ullman said he couldn't elaborate on what Thomas's role will be at the PE investment giant.

It sounds like a win-win for public pensions. By allocating an outsized portion of their private-equity allocations to home-state firms, they not only harvest high risk-adjusted returns they also give an assist to their local economies. But a fresh study by Yael V. Hochberg (pictured), assistant professor of finance at Kellogg School of Management at Northwestern University, and Joshua D. Rauh, an associate professor of finance there, suggests the approach is a costly one. The in-state private equity investments made by public pensions, the researchers found, “perform significantly worse” than those that they make outside their home states. The paper, “Local Overweighting and Underperformance: Evidence From Limited Partner Private Equity Investments,” takes a look at 18,828 investments by 631 different investors (public pensions, corporate pensions, endowments, foundations) in 3,554 private equity funds, including venture capital, buyout, and real estate funds, with vintage years spanning roughly 1980 to 2009.

Want to catch up on what your colleagues found most interesting on peHUB this week? Here are the posts written by our staff that garnered the most pageviews from March 21 to March 25. 1. Slideshow: Top 10 Largest First Rounds Of Internet Companies This Year by Larry Aragon 2. Meet the First 'Social Media Analyst on Wall Street' by Connie Loizos 3. Which Buyout-backed IPO in 2010 is the Best Performer? by Eamon Beltran 4. And the Winner of Mid-market Deal of the Year Is... by David Toll 5. Andreessen Horowitz Brings Aboard a Face Familiar to the VC Industry by Connie Loizos 6. By the Numbers: Washington State Investment Board's Buyout Performance by David Toll 7. Yuri Milner Said To Purchase $70M Silicon Valley Home by Mark Boslet 8. If It's Pizza You're Ordering, MidOcean's Had Enough by Bernard Vaughan 9. Looking For High-Growth, Low-Profile Startups? Check out Momentum Index by Connie Loizos 10. Did StepStone's PCG ties Cost It The New Mexico Advisor Deal by Jon Marino

It's earnings season in private equity land, and by that I mean the time of year when the dozen or so pension funds that disclose their return data update their quarterly numbers. The latest round of updates generally brings the return figures current as of September 30 2010. We don't have the resources at sister magazine Buyouts to compile all the numbers and generate overarching statistics, as we do once a year in the fall. But I thought it still would be interesting to produce statistics for one of the oldest and largest PE portfolios in the country--that managed by Washington State Investment Board. So, below follow some statistical highlights for the state's buyout portfolio, as of September 30. The performance numbers (including median, bottom-quartile, top-quartile return data for small, mid-sized, large and mega-firms) were generated using only numbers from the 85 vintage 2005 and older buyout funds in the portfolio to avoid the J-curve effect:

With battles over taxes and registration still looming in Congress, and with pot shots still being flung at PE by journalists, union leaders and others, the Association For Corporate Growth has decided to show naysayers that buyout firms can be a source of job creation and economic good for the country. A waste of time? I’d argue it is. Most buyout firms are first and foremost about generating high returns for investors through the buying and selling of cash-flow-positive companies. (Imagine a GP in a road show pitch: “So Ms. LP, how about we skip over the investment multiple and net IRR and just get right to the jobs growth!”) Job creation is often the happy consequence of the LBO strategy; the times when it’s not will continue to provide fodder for industry critics.

Last year it took a deal that generated a return multiple of 7x and a 62 percent IRR over a seven-year holding period to win the Buyouts magazine ‘Deal of the Year’ award. (Ovation Pharmaceuticals, bought and sold by GTCR Golder Rauner.) What will it take this year? That’s a question we’re hoping you’ll help us decide—by voting for your favorite deals in four categories: Small Market Deal of the Year, Middle Market Deal of the Year, Turnaround of the Year and European Deal of the Year. Just follow the links to our online voting booth, where you’ll find brief descriptions of the finalists. The editors of Buyouts will use the results of voting this week to settle on winners in each category; once we have those, we’ll ask you to vote on which of the four winners should also be awarded the coveted ‘Deal of the Year.’ (Please do not vote for your own deals, or ones in which you were involved as a service provider.) The editors will announce winners in the individual categories via Twitter (@buyouts) in the weeks leading up to our annual Buyouts NY conference April 26-27 at the Waldorf-Astoria Plaza Hotel in New York City. We’ll announce the winner of the ‘Deal of the Year’ during the first-day lunch on April 26.

Recent IPO filings by the likes of Freescale Semiconductor Inc. and HCA Inc. may lead some to conclude that mega-buyouts circa 2005-2007, once at grave risk from the recession, are finally in the clear. That may turn out to be the story. But an article published last week by three credit analysts at ratings agency Standard & Poor’s—Allyn Arden, William Wetreich and Kenneth G. Drucker—suggests many of the largest deals from the golden age of private equity remain at risk of defaulting on their debt obligations (see table, next page). Were the economy to stall, or worse, they could well go belly-up.

1) It's Not a Bubble, People; It's a Pyramid Scheme, by Connie Loizos 2) Scoop: Peter Wagner Parts Ways With Accel After Nearly 15 Years, by Alastair Goldfisher 3) Halsey Minor Sticks It To Virginia, Again, by Connie Loizos 4) 'Goldfinger' Hits $732M On 2nd Mount Kellett Fund, by Gregory Roth 5) Oak Hill To Make Back 40% of Dave & Buster's Investment in Nine Months--UPDATED, by Luisa Beltran 6) Riding High On Q4 Profit, KKR Expects To Fully Deploy '06 Fund, by Luisa Beltran 7) J-Dubs Redux: Beaten Abandoned, & Left For Dead, J.W. Childs Is Back, by Bernard Vaughan

At least, you can make the argument, according to the U.S. Securities and Exchange Commission. Take the practice by buyout shops of securing bridge financing from banks on new deals as a temporary measure until permanent financing can be put in place. “When market conditions suddenly turn, these [banks] can be left holding this potentially risky bridge financing (or committed to provide the final bank financing, but no longer able to syndicate or securitize it and thus forced to hold it) at precisely the time when credit market conditions…have worsened,” the SEC writes in a proposal published late last month to require registered buyout shops and hedge funds to regularly fill out so-called Form PFs. The forms would be used by the newly-created Financial Stability Oversight Council to monitor risks to the U.S. financial markets.

Bain Capital, one of the original members of the Private Equity Growth Capital Council, has not renewed its membership for 2011, the council confirmed for peHub. The firm no longer appears on the member list on the PEGCC website. The departure marks a blow to the annual revenue stream of the council, which has been active of late in Washington D.C. in fights against raising taxes on carried interest and in improving the industry’s image. However, membership has also been growing since the council opened its doors to smaller buyout shops early last year, mitigating the loss. Neither Bain Capital nor the council would comment on the annual dues that the firm has paid (nor would executives at Bain Capital comment on anything related to this story). However, that Bain Capital and its affiliates have an estimated $65 billion under management suggests the firm was paying as much as $750,000 per year, based on information supplied by PEGCC to sister magazine Buyouts in early 2010—see dues levels below.