As Dan, the Buyouts team, and myself embark on coverage of yet another private equity conference (Dow Jones’ PEA) I’ve got a few leftover snippets and highlights from the last one (Wharton, which I attended on Friday).
For one, I attended a GP panel, where I sat so far back that I couldn’t even see who was speaking. The most notable comments were:
Apollo hires two associates per year. Standard. Every year.
“The movie that plays out (in the next year) is going to be great. It’ll be like ‘Slumdog Milionaire.’ We all get rich but have to go through a lot of shit before we get there.” Another panelist chimes in: “More like “My Bloody Valentine.”
“The number of idle hands with good brains is extraordinary-the old rules of finance don’t apply anymore.”
For two, I sat in on an LP panel conducted by David Snow, the editor of Private Equity International. Some blind quote highlights:
-When asked about PE funds shutting down: “It’s every LP’s nightmare! There has been some attrition in the VC market and it will happen in the buyout market to.”
-What should GPs do to keep LPs happy? “It is important to be as LP friendly as possible in your LP agreements. Distribution with a preferred return, a carry distribution that is not deal-by-deal, and a strong key man provision.
-“LPs like GPs that work with their companies very, very closely.”
-Hottest strategies: Secondaries, distressed, mezzanine.
-“Technology won’t replace sources of energy and power.”
-Could CalPERs and CalSTRS end up bankrupt like Florida, where new employees have go use a 401K? “They, and other pensions, need to model themselves more like the pension funds in Canada and Australia. The difference is, in part, that they pay their staffers well so they attract top investment talent. They also require direct investments and co-investments, which provides more upside to investors.
-What about PE versus other asset classes? From a high-net-worth-individual fund: “Hedge funds were once seen as a substitute for private equity because investors didn’t like the ten-year tie-up. Now its looking like a perhaps smarter bet.”
-On the AICPA white paper on FAS 157: “If LPs have to mark-to-market, them some of them will solve their over-allocation issue!” I saw a GP make this comment more seriously, saying “If we mark down more aggressively, it allows LPs to get more money out the door.”
-Could LPs default? We’ve seen that GPs will try to “work something out” with LPs before forcing them to default.
For three, I started to liveblog a speech given by Andrew Ross Sorkin, the editor of Dealbook and frequent guest on CNBC, but the speech didn’t cover much private equity-related territory, so I trailed off. Here are the highlights:
-ARS says “He doesn’t mean to take the whole room down, a notch” but he thinks there is a false sense of optimism. He tried that one out on the journalists before saying it. I said ever since Lehman I kinda think everyone is aware of how bad it is actually…
-He eventually thinks private equity turns back the clock in the same way as venture capital in the late 90s. Yep, we’ve been saying that for awhile here at peHUB and Buyouts.
-“If you believe in mark to market, you believe in journalism. If you don’t believe in mark to market, you don’t believe in journalism.”
(Note: Yes, I know that image is not the version of “My Bloody Valentine” that the panelist was likely referring to.)