A certain, classic image, if you will, of market distress permeated the financial press this last month: traders with their heads in their hands, shoulders slumped, as exchange tickers in the background displayed stinging, slumping sets of numbers.
PEO did not jump on the doom and gloom bandwagon, but sought rather to make links and connections between world markets chaos and the private equity firms and investors that would most certainly be affected.
Our coverage on the collapse of 158-year-old Lehman Brothers focused on the fate of Lehman's $30 billion private equity portfolio. The day the investment bank filed Chapter 11, one of Lehman's junior private equity professionals in London was overheard at dinner reassuring his companion that his job was not in peril. “Private equity's a really good place to be right now,” he told her, mentioning he'd said the same thing earlier in the day in response to a frantic phone call from his father (not noting a private equity journalist was eavesdropping).
Aside from the immediate calming effect his words seemed to have on his date, from what PEO has gathered, they ring largely true. While secondaries firms may be circling – in fact one secondaries GP told us his recent meetings in New York are making him feel like “a kid in a candy shop” – chances are good that by this time next month, Lehman's robust private equity arm will have been sold to the highest bidder, or spun out by its senior managing directors.
An as-yet-unknown fate awaits the 70-some investment professionals at Merrill Lynch Private Equity, which is reportedly in the midst of a $6 billion fundraise yet suddenly finds its parent is now Bank of America. PEO's approach to the Merrill story – for now – was to avoid “sources familiar with the matter” speculation but take a good look instead at the assets in play. We did the same with AIG's $30 billion private equity portfolio, explaining its importance and analysing its saleability given AIG's complex structure, now owned by the US federal government and overseen by Clayton Dubilier & Rice operating partner Edward Liddy.
While keeping an eye on these financial behemoths and their musical chairs, PEO was also busy with business as usual, that is, telling tales of fundraising success, franchise expansions and new recruits. The Blackstone Group's hire of Trent Vichie from Macquarie Securities to head its push into infrastructure – a story PEO was first to reveal among private equity-focused publications – as well as TPG's three fund closes totalling $30 billion and Crédit Agricole's launch of a co-investment business paint a vivid picture of an asset class with staying power.
Despite the market distress, we are not anticipating photos of downtrodden GPs with heads in their hands any time soon.