Salem: If an investor knows more than their CEO, they backed the wrong CEO
Paul Salem · Private Equity Masters: Paul Salem – Providence Equity Partners (Capital Allocators, EP.175) · Feb 1, 2021 · at 35:50
Paul Salem, Senior Managing Director Emeritus at Providence Equity Partners, discusses portfolio governance and executive leadership evaluation in private equity.
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“For me or Providence Equity, I always say, if you go into a board meeting, and you know more than the CEO, or you think you know more than the CEO, you got the wrong CEO.”
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More from Paul Salem
Salem: Increased Competition from SPACs Will Force Private Equity Returns Down
“And I think SPACs aren't going away. And so I think there's even more competition. So I just think there's just one overarching fact here is returns have to go down. They just have to.”
Salem: Providence cut thousands of idle workers at Eircom
“And so we had to get rid of thousands of workers who literally just weren't doing anything.”
Only three in ten operating partners at Providence were actually good
“And of the 10 operating partners, three were good, three were mediocre, four were not so good.
Not because they were bad.
They just didn't want to work.”
Salem predicts private equity returns will inevitably dampen to single digits
“So I do think private equity will have a dampening of returns, meaningfully dampening, but when the 10 years trading at. Maybe if returns are only single digit for private equity, that's still good enough. I just think returns have to come down.”
Private equity is a superior business to hedge funds given inside access
“Where a hedge fund is operating from the outside in, we're operating from the inside, and it's just a much better way to invest. I've always been a big believer that private equity is just a much, much better business than the hedge fund business.”