10 Outrageous Private Equity Predictions for 2020

Broker studio. He says he's based in Paris, but he's really a global citizen all over the world on a plane or something everywhere in Berlin due buy all of these different places, because this is the global industry, to say the least. Great to see you, thank you, Happy New Year. Related, um, so talk to us about some of these predictions. My favorite actually is the first one. Uh and I'll tell you why, because it's Blackstone raises

billion dollars in a month. And you know, Carol and I have a joke because we spent all that time with Steve Schwartzman. One of the things he likes to do is say go big, and why wouldn't they raise. It's not the craziest idea. It may be crazy for the next year, I mean for this year, but I mean I guess that in the next years this is going to happen. And this actually may not. It may

not need a month, it may need a minute. Uh. The reason why is that private equity is obviously interesting too many now, including the retail market, and uh, as you know, the SEC will be putting out some new rules that basically allow the public, maybe not all of the public, but a lot of it, to actually invest in private equity funds. And that's a reason to go

I guess that's another reason to go big. One of the other things you point out, and this is a this is one very close to something we talked about a lot is soft Bank. Uh. And the Vision Fund and how when we're you know, sort of getting more into the world of venture capital here momentarily but a moment but uh, you know, you have a bold, outrageous prediction that they'll raise a hundred fifty billion dollars. I mean, they've raised huge amounts of money uh so far. I

mean the first Vision Fund was a hundred billion. Indeed, it was actually the largest and it's still I guess the largest fund out there, and a hundred and fifty billion would obviously be the new largest fund out there. It's actually four times the number two funds fund. I think it's twenty six. So yes, they already have a lot of money, and they should have more. I love though, as a caveat to this is I mean a lot of that money comes what specifically from state connected entities

in China. Correct, Yes, there's a nice little circle there. Yes, indeed, indeed, and then that's uh, you know, that's because of what's going on in this world. I mean, China is obviously taking a big piece of the of the action. And I guess they want to put money into private equity every air They've been buying Africa basically through private equity and and other other areas. So I mean, yes, yes, yes. You also talk a little bit about c p p i B, the Canada Pension Plan Investment Board, one of

the most admired I think investors out there. They really pioneered in many ways, along with some of the other Canadian pensions, this direct investment model, and I think you and I have talked about that over the years. What's the what's the sort of outrageous prediction there, and what's underneath it? The prediction is that they will put out

a fifty year fund. Many people in this space feel that, you know, investing for five years or ten years is not enough, and that if you find a good investment you should keep it. Uh and some other people, you know, pensioneers, feel that if if they can put their money at ten percent a year forever, that's obvious be good. Hence this prediction not so outrageous. Actually so okay, I find this little outrageous. Warren Buffett's Berkshire Hathaway say launching a

private equity division. I had to remind myself. I knew he had made some comments that were critical of PE. I just had to remember. But in the past he has said, specifically, we have seen a number of proposals from private equity funds where the returns are really not calculated, a matter that I would regard as honest. If I were running a PENCHEON found it would be very careful

about what was being offered to me. So is he saying I'm going to do a private If he does this, he's going to say I can do a private equity fund that is more transparent and better than the ones that are existing. I mean, this is kind of interesting to this, you know thought. I think what he's doing is already private equity, right, he is already buying control positions in companies that need, you know, something, and this

is what people are doing. So here, the prediction is that he would change, you know, the format of of this fund, but that's it. I mean that, I guess the business itself would would basically be the same. So wait, wait, so would this be a fun that others can then tap into? I guess so yeah, sure, yeah, well and open to others yea. And look, I mean he's partnered with three g I mean he's gotten into the private

equity business at least from an arm's length perspective. One more outrageous and then we're gonna take a break and come back. Chuck Schwab buys KKR. I love this one. Chuck being Henry Kravis's boss, I don't quite see it, but go on. Well, I'm not sure this is the main idea. The main idea is that may you know, main mainstream asset managers want to become big also in private equity, and that the best way to get there quickly is to buy something that's there, and some buy

something that's big. So that's that's the reason you're listening to Bloomberg Business Week Carol Masser along with Jason Kelly. Our guest at this hour Antoine Drean, chairman of Triago. M Antoine, I feel like I did doesn't go by, We doesn't go by where there is certainly some concern about the growing power of the private markets in which private equity plays. Um. What does the private equity industry,

what what's on their mind? What do they need to be concerned about in regards maybe future legislation or regulation. There's going to be more regulation because there's going to be more people involved and and and more uh, you know, more of the retail side. So there is going to be more. There's already a lot actually, and I think this is an industry where LPs play a big role. LPs are I mean investors in this asset class, are you know, big pension funds or other institutions of the

same type. And they they come with their own regulation and it's actually quite tough, um, and they're and they're upping the pressure. It sounds like right. I mean they're demanding more transparency around fees, around the ultimate investments that funds make, right Yeah, I mean they want to understand what their money is is used for and uh and where they invest, etcetera. Just to make sure that they can you know, invest with the same groups over and over. Um.

So yes, they are doing that. So in terms of anything new that might come down, how do you see it? What what specifically might come down as more regulation on the industry, more transparency for sure. Um what does that mean, like in terms of reporting or like what? Yeah, more more more reporting, more more thought behind valuations. Uh, it's

already much much better than ten fifteen years ago. You know, ten fifteen years ago you had different prices for the same asset, but at the same time in different reports. Today you pretty much have the same number for one main reason, and it's called the secondary market. Uh if if if a fun trades on the market and the discount is huge compared to others because marks are uh you know, way up there. That's one reason. That's that's one reason to to look very closely at your numbers.

And what about the political side. I mean we are in a in a US presidential election year, we've had Elizabeth Warren and others come out and call out private equity specifically and by name. You know, she's talked about Blackstone, uh and others. How seriously are the private equity managers taking that? How seriously should they take it? In US? I think they are. I've read word scapegoat somewhere today. Um, I think they have to be aware that this is coming.

We had that in Europe already a few years ago, so I mean, as as a European, I know what it means. Um I did it change behavior in Europe? I think it changed the way that private equity players were describing and themselves and and their language, and and they put a lot of you know, they put a lot of work into showing the people how many jobs they were creating, what value they were bringing to the

mark it, etcetera. So there were there were going they were doing a good job in in showing people that they were not bad. Right. Well, I think that's what's hard about private equity the industry. Right, there's contrasts. I mean, I think there's that side where they make investments that other folks would not even touch, certainly not the traditional banking world or financial world or even you know, the

public market. So there's that service and then there's the other that feels like buy a property, clean it out, get rid of all the costs, sell it, make a profit, move on. So you know, there's that message that and maybe a little bit there is a little bit of both of that going on. Well, at the end of the day, I think that private equity has indeed created

a lot of jobs and a lot of value. And I think many studies showed that there are obviously a few counter examples of private equity shops that didn't behave very well. But if you look at it deeply, I mean it's really a small number of firms and people. The vast majority are doing a great job in providing again value too to their investors and uh and and

two companies their their owning. And yet, you know, going back to something you said, they do have a public relations problem to to a large extent, because Elizabeth Warren can catch a lot of attention. And maybe it's the power of the language and the power of the rhetoric, but the narrative does you know, this goes back to a previous presidential election where admit Romney, you know, suffered pretty mightily and it may have lost the election, you know,

owing to that association. I I think that they all have to make sure that their communication is getting better and that they actually tell people what they're doing and people will understand that this is this is okay, right right, Well, it'll be interesting to see too if private equity can get ahead and be a part of at least this movement. It feels like to companies and investors acting in a much more holistic way, right, you know, and just thinking

about uh the end. Investor Antoine Dround always a treat to catch up with you, Chairman of Triago. You can check out online his outrageous predictions for private ecuty and so I'm not so outrageous. So outrageous and they tend to come at least partially true, some of them. So check that out. Always grateful to him for stopping by amid his world travel