In this episode, Scott Becker dives into the challenges facing private equity firms like KKR, Carlyle, and Blackstone.
Chapter 1: What are the current challenges in private equity?
This is Scott Becker with the Becker Private Equity and Business Podcast. Today's discussion is a discussion about what's wrong with private equity. And so here is the issue. Over the last year, private equity funds, the big, big ones, the KKRs, the Carlyle Groups, the Blackstones, saw a good rise last year in their stock prices. Now, they seem to have a fundamental problem.
Chapter 2: Why did KKR and Carlyle's stocks decline?
And this is why KKR's stock went down after it released earnings and why Carlyle's stock went down today after it released earnings. So what's going on is you've got a bastardization of the business. It's sort of like the Vegas house. What you have going on now is each of their fee income is rising tremendously. They're all recording record amounts of fees.
Chapter 3: What does rising fee income mean for private equity?
A lot of it's on private credit placements, often of their own, where they're taking fees off the top. Here's what we find with businesses. When businesses are producing real results for customers, in the long run, those businesses thrive. For example, what's going on with PE right now is the opposite.
Chapter 4: How do real results impact business success in private equity?
They are winning on the fee income business, but they're losing on the exit business and making money from their investment business. So one of the things that Carlyle said in their report was, and they try and say this as quietly as they can, aside from fundraising being a little tepid, a little slow, that essentially the juice in the sale of businesses is,
is not happening right now that's the 20 percent they make on the you know the two and twenty is the general fee two percent fee income twenty percent profits on exits right now they're not seeing that so that's where you're starting to have trouble right now as investors aren't hitting their rates to return and ultimately the private equity funds if they're doing great on fee income uh that means they're they're you know doing great on sort of the carry
or just not really, I guess you want to call that the carry, just the general fee income, but they're not really making money for the investors in the way they were. At some point, That pushes investors to keep on staying with this, or they say this has got so democratized that we go back to S&P index funds and stocks. But that's today's discussion. What's wrong with private equity?
Text me at 773-766-5322. If you're the first to text me, I'll send you a $100 Amazon gift certificate that deals with this. And give me your thoughts. Give me your opinions. I'd love to hear them. Thank you for listening to the Becker Private Equity and Business Podcast. Thank you.