Verdad Media Roundup

The Private Equity Meltdown

For years, we have been warning of an asset bubble in private equity. We argued that private equity represented the greatest correlated mistake asset allocators were making, with survey data suggesting upwards of 90% of investors believed private equity would outperform public markets. Few listened.

The readers of our weekly research were an exception. After every article we wrote about PE, we’d receive emails detailing stories of excess (veterinary clinics selling for >20x EBITDA, an insurance brokerage that had been sold three times in five years, a family foundation whose OCIO took them to >60% private equity). And we spent long hours working with family offices, investment committee members, and CIOs to develop arguments to resist the tidal wave of pressure for ever-increasing private allocations.

Today, private equity is in the early stages of a major meltdown. The whisperings began last fall, and now the mainstream financial press is picking up on just how bad it’s gotten (this article in Bloomberg paints the picture). Distributions are way down, returns are lagging public markets, fundraising is collapsing, and, from what we hear, the picture at the portfolio company level is dire, with the majority of companies’ cash flow negative after debt service.

We have been active in speaking to the media about these developments. I spoke with Bethany McLean for an article in the Washington Post, in which I discussed a sea change in attitudes among allocators. And I spoke at length with the Economist’s Money Talks podcast.

Thank you for supporting the research we’ve shared in our pursuit of truth through empirical evidence. After years where it looked like we were crazy to question “The Best Performing Asset Class,” it seems perhaps our deep empirical research into the asset class was in fact leading us to the right conclusion.

Verdad Japan

For every bearish article we’ve written on private equity, we’ve probably written two bullish stories on the investment opportunity in Japan.

We gave Bloomberg an exclusive opportunity to report on an exciting new development for our investment in Japan, which I quote from below:

“Boston-based hedge fund Verdad Advisers LP is planning to launch a new Japanese equity fund focusing on small-cap companies. The fund, which may launch as early as this year, will continue the strategy of the investment company’s existing two micro-cap funds by looking for capital inefficiencies like debt-heavy or cash-heavy balance sheets.”

If you’d like to learn more, please reach out to Graham Infinger at graham@verdadcap.com.

Allocator’s Choice

We were honored to receive Institutional Investor’s Allocator’s Choice award as a Rising Star in hedge funds. Brian, Graham and I were in New York to receive the award (pictured below).