PEI Staff

Limited partners in private equity funds can be a skeptical group when it comes to unrealized returns. And that can be a problem for the many general partners looking to come back in 2011 to replenish their war chests. The increased focus on cash-on-cash returns became apparent to me at the annual meeting of a well-known growth equity fund. One of the fund’s star portfolio companies presented a detailed account of how it had grown revenue and EBITDA in a very difficult economy. The fund had already distributed roughly half of its cost basis in the investment and had written up the value of the company by threefold. During cocktails, while speaking with the representative from a mid-sized college endowment invested in the fund, I remarked that the company was still quite conservatively valued. The LP responded, “I’ll believe the valuation when I see the exit.”

Fed officials who don’t see signs of inflation haven’t been watching loan prices. As credit markets healed over the last two years, investors saw loans behave in a recovery as they were designed to. Default rates fell and recovery rates rose, proving the asset class could withstand a hundred year flood and come out barely moist. Three months after Lehman failed loan prices in the secondary market reached a record low of 65 cents on the dollar. At the time, no one knew whether a bottom had been reached. Anxiety reigned and markets had no clear guidance on a path to recovery.

“The food in this place is really terrible,” one elderly woman complains to her friend at a Catskill mountain resort. “Yeah, I know,” replies the other one, “and such small portions.”   That’s where investors find themselves today in the broadly syndicated market. With leverage up and spreads falling, deal quality is eroding. Yet thanks […]

I’ve lived in Boulder for 15 years after living in Boston for a dozen. While I’ve spent a lot of time in Silicon Valley — both as an angel and venture capital investor — I’ve never lived there. While the firm I’m a partner in — Foundry Group — invests all over the United States, […]

As anyone trying to get a mortgage these days knows, leverage isn’t what it used to be. The Great Deleveraging, begun in late 2007 as the credit crunch took hold, affected the entire corporate and consumer financial services community. Debt became a four-letter word, thanks to the unmasking of sub-prime mortgages as the true villain of the era. Those no-income-no-equity loans took leverage to its theoretical extreme, coming to represent all that’s bad about structured credit and securitization. The carnage it brought to Main and Wall also made it impossible to appreciate all the benefits – liquidity, low cost, diversification of risk – of those off-balance sheet financings.

Fort Washington Capital Partners has re-launched its seventh fund of funds, which it originally initiated about a year ago. Although the firm got a $10 million pledge last fall from the City of Cincinnati Retirement System for Fort Washington Private Equity Investors VII LP, the pension cancelled that commitment this spring. Meeting minutes do not indicate why it was cancelled, and the pension did not respond to a question about it. A spokeswoman for Fort Washington Capital said the firm does not comment on funds while they are in the market.

“My, what big teeth you have, grandma!” exclaims Little Red Riding Hood in the beloved, eponymous fairy tale. “All the better to eat you, my dear!” declares the Big Bad Wolf, before devouring Little Red Hiding Hood and running off into the woods. Over the last few months, investment bankers have been eagerly reaching out to corporate buyers at the large public technology companies, as their burgeoning balance sheets have grown large enough to cause even a sangfroid, buttoned-down banker to salivate. For example, the eight US-based technology companies with market capitalizations of over $100 billion (Apple, Microsoft, Google, IBM, Oracle, Cisco, Intel and HP) are sitting on over $200 billion in cash and short-term investments. Throw in the top three healthcare firms by market capitalization (J&J, Pfizer and Amgen) and the figure is $250 billion. Further, each of these companies is in a strong competitive position, competing in markets with positive secular trends thanks to the burst of innovation that is ahead of us. I can’t cite another time in the brief 50 years history of the technology industry when so many US-based companies were in such strong global leadership positions in so many compelling, growing markets.

Investors are paying attention to loans as an asset class today for three reasons. First, default levels and price volatility coming out of the Great Recession returned to normal way faster than anyone anticipated. Second, the scare of defaults and volatility convinced portfolio managers that being at the top of the capital stack as a […]

Writing a book is hard. Really hard. Much harder than I thought. So I’m extra satisfied that “Do More Faster: TechStars Lessons to Accelerate Your Startup” is finished, in print and available for the world to buy. I’ve been helping create software and Internet companies for over 25 years, starting with my first company, Feld […]

Fall is officially here and for many diehard fans we’re happy to be in the midst of football season once again. For me, it means rooting for the Steelers and trying to get the weekly picks in on time. But for 27 million others, it means fantasy football. I have never quite understood the fantasy […]