Welcome to PEO 2.0, a new series on the PEI back page. Each month we will be taking a look at which global online news stories have pushed our servers to the limit recently and why.
In August, we broke the news that Toby Wyles, the former Apax Partners heavyweight, is about to return to the mid-market with a high-powered team. Indeed, the launch of Vitruvian Partners (28 July) was the most popular story on the site since October last year.
It's easy to see why: there is pent-up demand for well-staffed start-ups in private equity according to investors. One fund of funds manager told PEO there is always a need for new blood in the industry, but it helps if it is new blood with pedigree. He said it was surprising that Europe had not generated more new teams, given the relative maturity of some of the established players.
It took Wyles and his team about two years to shake off the non-compete shackles of their former firms – small wonder that stories of new formation hitting the scene are so few and far between. Perhaps the industry needs to relax a little and let its leavers get on with business.
The second and third placed PEO stories in August highlighted the growing polarity in the fundraising market at the moment. Permira scoring a mega-fund home run for Europe (4 July) was in sharp contrast to Taros Capital, the spin-out from private equity megalith AlpInvest (4 August), whose campaign ended in failure.
Permira's result suggested it has never been easier to raise a fund. But as anyone close to Taros would tell you, the truth is very different. Outside of the asset class's crack elite, raising a private equity fund has never been harder, unless you have a genuine point of difference.
As one manager said recently to PEO, investors are looking for alpha. Or in plain English, investors want to know how you are going to outperform the market and not just the quoted market equivalent. What is it about your firm that is going to put you in the top quartile of private equity performers? Established players have that question licked. But with Taros, investors appear to have decided they did not need another European mid-market manager.
Perhaps the most fun story of the month was also the most perplexing and yet reassuring: Europe's private equity masters of the universe are just as hopeless as the next man when it comes to managing their own finances, according to a recent survey (“PE staff kept in dark about incentives”, 13 July). A staggering 90 percent of those surveyed had no idea what the value of their carried interest was.
Now even allowing for a laissez faire attitude that must develop when rewards reach a proportion of more-than-you-could-spend-in-a-lifetime, this news gives hope to everyone who does not balance every penny of income. Or perhaps it is just a symptom of a boom. It will be interesting to see if the same people will be quite so clueless when the cycle turns down.