The Ledger
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Abell: Data shows almost zero correlation between buying cheap and PE returns
“You might say, well, buying cheap is better, but when you look at the actual data, you do a regression analysis, and so maybe you would expect to see it in the cheaper you bought, the return would be up and to the right. And what we really see is that, one, th…”
Abell: Vintage year benchmarks fail to match private equity investment timing
“A vintager benchmark has some significant flaws in it. First off, it puts against managers that have started their funds at similar times. These are managers that, of course, are investing over a two to five year period, depending on how quick or how slow they…”
Abell: Anyone Claiming to Pick Top-Decile PE Managers Is Lying
“And I say probability because if anybody tells you they can pick the top decile manager of any given vintage year, they're completely wrong, right? And lying.”
Alex Abell: Many GP-led continuation vehicles suffer from significant conflict issues
“Now, we see tons of these things, and many of them have significant conflict problems. They have significant issues around structure and alignments.”
Abell: Larger private equity investments historically yield lower returns with less risk
“We were doing at BlackRock larger investments on the fund side, larger investments on the co-invest side and secondary side, and that part of the market has historically generated less returns, and certainly in a less risky way as well.”
Abell: Institutional LPs often deploy $10 billion with just three people
“The problem is that for most limited partner organizations, even sometimes a very large institutional platforms, they don't have a huge staff like a private equity fund of funds does. They might have two or three people working on investing ten billion dollars…”
Abell: Small market buyout is historically PE's highest returning segment
“And frankly, historically, it is the most attractive part of the private equity markets from a returns perspective.”
Abell: Private equity allocators either strictly outsource or invest in-house
“What they found out over time, and what I found out over time, is that there wasn't a lot of gray area. There were people that wanted to outsource it or needed to outsource it to someone like RCP, and there were people that were always going to do it themselve…”
Abell: Lower Middle Market PE Returns Come From Growth, Not Leverage
“So in our part of the market and the smaller part of the market, we don't use financial leverage to generate most of our returns. Most of the returns are generated through growth. They're generated through taking smaller, less sophisticated companies that have…”
Abell: Lower Middle Market Deals Use Around Three Turns of Leverage
“In our part of the market, we're using maybe three turns of leverage on EBITDA. That's probably less than half than most of the bigger part of the market is.”
Abell: Evaluating PE managers requires measuring journey risk, not just end returns
“If we have a way of measuring that kind of risk systematically through their portfolios, then the end number itself is not the only thing we need to look at. We need to look at the journey. Because there's going to be lots of examples of that where they aren't…”
Abell: The first three months at a job shape long-term career reputation
“Early impressions that you give people of yourself, and not just first impressions, not meaning like when you first meet people, but let's say the first three months you're working with a new job is of outsized importance to anything you'll do after that three…”
Alex Abell: GP-led secondaries now account for about 50% of secondary market
“Traditionally, when we talked about secondaries, we would talk about limited partner secondaries. That used to be 95% of the market, and now it's probably more like 50% of the market. The other 50% has been GP-led secondaries.”