I found this take on the private equity industry from one of its more well-known insiders to be refreshing in its honesty.
Guy Hands is a “name brand” PE executive from London who made a very bad deal at the peak of the market. In his discussion with Andrew Ross Sorkin, he comes clean about that and many other truths from the dark side of the PE business.
From DealBook (New York Times):
“Clearly a large number of P.E. firms were totally overpaid at the peak of the market,” he said. “The fees were an entirely unwarranted windfall, as the managers did not use the excess fees to invest in resources to grow the skill base of their funds.”
He estimated that the private equity firms’ “net earnings will decline a minimum of 80 percent from the peak in 2007.”
Success had less to do with performance or risk management, he said, and more to do with bulking up. “It is time for investors to see through the elaborate marketing machines created by the industry,” he said.