You cant eat private equity IRR returns

Private equity is a scam.

IRR calculations encourage a quick return of cash. That’s not the way to build wealth unless you can easily reinvest that cash. It’s tough to find good deals.
 
Tell that to the folks that funded AMZN. It is tough to find goods deal - but if you go one or two for ten - you win.
 
You can't keep money out of VC and PE - the permanent funds love it. A group of former derivatives folks here in Chicago started a VC firm after they sold their MM business and it incubated two unicorns - a ton of losers. OCA Ventures - the old O'Conner partners - they also incubated TradeKing before it was sold to Ally. Two unicorns and you don't need much else.
 
newwurldmn said:
Private equity is a scam.

IRR calculations encourage a quick return of cash. That’s not the way to build wealth unless you can easily reinvest that cash. It’s tough to find good deals.
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Why do you say that? You get rich running a PE fund by the percentage if the total return you get. Given the choice of a 12 month investment with a 100% IRR which comes to $10M (so you get $2M if lucky enough to still get 2/20) or a 5 year investment with a 20% IRR that gets you 20% of $500M a PE fund manager will take the 20% IRR 100% of the time! Given most funds have an investment and divestment period that are fixed time frames anyway, there's actually a big disincentive to doing a 6 month flip for big IRR but small absolute $ returns and then having to do you company search, due diligence, and negotiations all over again to reinvest that vice doing the effort once and getting solid returns as long as possible. So even 20% IRR giving $50M profit over 5 years beats 100% IRR giving $10M in a year. Certainly PE moves on a 5-10 year time frame vice a 50 year time frame, but 5-10 years is two or three lifetimes in my industry so it doesn't matter to anyone I'm around to have that kind of horizon.

Now the whole leveraging up consumer brands to the point there is a huge chance of BR thing I do think does a disservice to everyone but the fund managers who initially extracted the cash, if you want to talk about PE induced dead weight loss....
 
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