Bank CEO identifies the new most important jobs in private equity
Jefferies' CEO Rich Handler has released his new leadership letter, written in conjunction with Jefferies President Brian Friedman as a follow-up to his earlier offering of boomer wisdom from deep history, when rates were more than 1%.
In today's offering, Handler suggests the transition to higher rates is "closer to the end of the transition period than the beginning" and offers some tips on what the "new (normalized) interest rate regime" means for the world. If you work in private equity, it's worth paying particular attention.
In the old boomer times of non-zero rates, private equity firms operated in a different world, says Handler. "It used to be hard to raise locked up money with significant duration," he writes. "Marketing efforts for private equity and private debt were long and arduous, as illiquidity was viewed with caution..."
This wasn't the case in the zero returns world, where investors were willing to lock money into illiquid investments in pursuit of yield: road shows for private equity and debt raises "became walks in the park," says Handler.
As rates return to a more normal level, this will no longer be the case. In the new/old boomer reality, investors will only lock up their money with "talented" funds, and persuading investors that you're talented will be an art in itself.
The pain is already apparent. Carlyle, for example, only succeeded in raising $600mn for its new, flagship buyout fund during the last quarter. The hope is that the arrival of new ex-Goldman CEO Harvey Schwartz will make it a bit more appealing.
In the meantime, fundraising expertise (often found in senior women) stands to become important at Carlyle and elsewhere. Handler says fundraisers may have to flex harder for smaller funds in the future, but their jobs will at least be assured - which may not be the case for investment professionals with far less to invest.
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