Jason Gold

https://lnkd.in/gZeefZhX Private equity funds gathered $176.7 billion in the first quarter of 2024, a drop of roughly 10 percent from the $195.5 billion recorded in the same period last year, according to preliminary findings from PEI data. Interest rate uncertainty continues to weigh on buyout and exit activity, while record dry powder for the asset class remains stacked for 2024, the data found.

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This FT article has a fancy graphic illustrating the layers of debt in private equity, but -- despite my prior post warning about the risks of debt layering in PE -- this article is inaccurate scaremongering. Here’s the key line: “Much of this lending is ultimately underpinned by the financial health of a fund’s portfolio companies. Yet every transaction ends up adding more leverage to heavily indebted businesses, which can make them more vulnerable in a downturn.” This statement is fundamentally incorrect. From the leverage used by General Partners or Limited Partners on their overall private equity portfolios to the use of subscription lines, secondary fund leverage, and leverage by funds purchasing GP stakes—none of these add leverage to the individual businesses or increase their susceptibility to economic downturns. The only mechanism that does add leverage to a business is a dividend recapitalization. However, the alternative is typically the PE firm selling the business to realize its investment, where the acquirer, especially if it’s another PE firm, would likely employ the same amount of leverage. Net Asset Value (NAV) loans may represent leverage on leverage from an LP’s perspective, but they do not increase the portfolio company’s debt or its bankruptcy risk during a downturn. Instead, they merely increase the possibility that the GP might need to sell sooner than desired to repay fund-level debt. Therefore, the only factor impacting a portfolio company’s failure probability is dividend recapitalization. The bank’s expertise is to assess the risk of its debt investment in the company. Whether a GP sells a stake in their management company, an LP sells a stake to a secondary fund, or the fund uses a subscription loan (a short-term loan backed by LP capital commitments to optimize investment IRR by delaying capital calls) to purchase the company—none of these scenarios affect the portfolio company’s ability to weather a downturn. “There should not be a pocket of the market that touches on so much of the economy in such a sizeable way, where we can say, ‘oh there’s leverage,’ and then very few of us can explain what that leverage means and why it might—or might not—be risky,” said Victoria Ivashina, a professor at Harvard Business School specializing in private capital. I can only assume Professor Victoria Ivashina was either unaware of the article’s specifics or, as a private markets expert, she is 'one of a few' (?) who could have alleviated the author’s concerns about this ‘web of debt.’ Moreover, where is the causality here? There is no indication (other than the title of the article) that PE firms are coercing banks into making these loans. The title could just as easily have been “How Banks Have Mired PE Shops in Potentially Depression-Inducing Debt.” Both parties willingly engage in these transactions, and as new debt products emerge, banks are as proactive in marketing them to PE firms as the firms are in seeking them out.

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Highlights from This Quarter’s Insights: -Market Volatility: Q3 2024 saw market fluctuations, but the Fed’s 0.5% rate cut in September restored stability. -Strong Performance: Most of Access Wealth’s diversified portfolios outperformed benchmarks amid market de-concentration. -Economic Strength: U.S. GDP growth and job data indicate a potential soft landing. -Emerging Markets: Emerging markets are becoming attractive as Fed easing boosts global liquidity. Key Risks: Political uncertainty, geopolitical tensions, and high U.S. valuations pose risks.

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Sharecare (NASD: SHCR) is the recent target of Altaris as more public companies are going private in the current difficult capital markets environment. Other deals include clinical trials, mental health and more. Read the latest deal news in LECOs weekly healthcare newsletter. PitchBook also released their takeaways from the Healthcare Capital Markets & Innovation Summit LLC HCMIS24 (Save the date May 28-29 2025) #healthcareinnovation #dealmaking #privateequity #goprivate #TheSmartHealthCity #HCMIS #HCMIS25

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Todays convo- “Why an interval fund?” Pretty easy. The Fund landscape needs an overhaul. One big piece, depending on your LPs, is access to liquidity vs the traditional 5-10 year lifecycle of a fund. Interval Funds allow holders to sell periodically (at periodic intervals). If you couple that with a secondaries trading platform… you have a setup built for for pretty attractive entry points and liquidity across LPs. That’s exactly why we have designed the next phase of Champion Venture Partners to be just that. Reach out, join us, big news ahead.

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Generalist funds are outpacing specialist funds with returning cash in this market cycle per PitchBook. While the outlook is brighter, we are realistically still in a down cycle for private markets. My guess is that there has not been a lot of cash returned to LPs over the last few years. However, funds and companies with greater exit optionality are currently carrying the day. From the article: "The turnabout in relative positions is a result of specialists being restricted to established exit routes including IPOs and strategic or corporate acquisitions, while generalists have more options for exits and may have exposure to different market regions and sectors, giving a higher probability for distributions." This will be a growing issue as many funds begin to push up against their 10-year mandate. Endeavor Colorado #privateequity #venturecapital #entrepreneurship #founders #startups #investing #innovation https://lnkd.in/ghH9CYhG

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🌟Some positive data-driven insights from Forge latest report in the private markets! 🌟: - After 2 challenging years, private markets appears to be accelerating. Forge Private Market Index (FPMI) had its best month since 2021, rising by 5.2%. - Astera Labs & Reddit, Inc. IPOs translated to strong gains from last private market reading: Astera Labs up 383% and Reddit up 67%, compared with their Forge Price on Dec 31, 2023. These two contributed more than half of FPMI's March 5.2% rise. - March saw highest proportion of buy Indications of Interest (IOIs) on Forge: 61.4%, since Aug 2021. Forge saw 45% increase in IOIs submitted in Q1 2024 compared to Q4 2023. - Median companies still trading at an average discount of -51% on Forge Markets compared to their last primary round valuations, indicating still a window of opportunity for investors. - U.S. IPO market grew significantly in Q1 2024 with 49 public offerings, up from 33 in Q1 2023 (size of listings also increased with proceeds jumping by 230% since last year, according to EY). In Q1 2024, the median company on the Forge platform raised capital at an effectively flat valuation compared to its previous funding round. Even best-performing companies are not achieving substantial valuation increases when raising primary capital compared to previous years. That being said, seems like an opportunity for our Global AI Matchmaking competition where we have already 92 early stage applications and are still holding wild cards in the late stage category. The wild cards enable selected late stage applicants to go STRAIGHT TO FINALS at our Investor-Startup/Scaleup matchmaking AI Competition to get exposure to 104 Investor Judges at the finals in San Mateo - Bay Area at Draper University! Aligned with the trends from Forge, these later investor judges are definitely deploying similar to True Global Ventures and looking forward to bridge the "Bid-Ask spread" at our competition to get some deals done! 🎉 https://lnkd.in/d6SrfjW3

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