What a stretch of scandals for private equity. We’ve had massage parlors, college admissions cheating … what’s the next scandal that will include private equity? Everything comes in threes, right?
It’s all part of life here in what I like to call Dispatches from the Peak. We’ll see how the law comes down on these folks (I imagine not too harshly).
What kind of Peak behavior have you noticed? Reach me with your thoughts at email@example.com.
Pull ‘em: TPG reportedly will allow LPs who have committed to its second Rise Fund, which had been trying to raise as much as $3.5 billion, to pull their pledges. Several large public systems, like New Jersey’s and San Francisco’s state pensions, have committed to the fund so far.
TPG said yesterday it fired Bill McGlashan, while McGlashan said he quit, according to Reuters. The firm had put McGlashan on indefinite leave earlier this week after he was accused of taking part in a college admissions cheating scheme to get his son into USC.
The problem those pensions might have with the fund is that they pledged their money with the understanding that the platform was led by a certain individual – in this case McGlashan, who was CEO of Rise Fund.
LPs back individuals or teams, who they believe will invest their money prudently over the 10-year life of the fund. A private equity commitment, unlike, say, investing in a public stock, is akin to entering a long-term relationship, and breaking up is nearly impossible, or at least not possible without incurring penalties or losing money. So LPs who commit money to a PE fund have to have confidence the team leading the fund will be there to run things through the life of the fund.
Rise Fund will have to explain to LPs why they should still have confidence in its leadership team without McGlashan. Rise Fund going forward will be co-led by TPG’s co-CEO, Jim Coulter.
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