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the route to growth is moving money from business X to Google/Facebook
could you explain this a bit? interested in what you are getting at.
I agree that many investments seem to be based on the "bigger fool" theory, and the likes of Vision Fund have kept this moving along nicely, so far at least.
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This is a very broad topic and I do not have the time to pull specific data but let me throw out a few rough stats and thoughts.
Historically only around 10% of PE exits are IPOs and if anything that number has been shrinking for a while. IPOs take a long time and typically involve a lock-up period for shares, better to sell to a strategic buyer, e.g. sell your juice business to Cola. PE investors are skeptical of PE to PE sales but the argument is a small UK focused manager may build up a national business that can be taken global by a regional/global PE manager.
Not sure where that 50% to Google/Facebook number is coming from or what it is based on. If it is advertising revenue, it seems like just another way of saying that Google/Facebook dominate the online ad market. How is this different for public companies?
If you are in the industry it is fairly easy to identify the largest PE investors. Any member of the public can look at IPE.com for example, which will take longer because you have to scrape data together yourself. A lot of capital is coming from pensions schemes.
PE spans the entire spectrum from tiny companies to very large companies.
Liquidity crisis is an odd idea for PE funds. By definition PE is private, i.e. not listed and liquid, so investors are going in with their eyes open and large institutions typically allocate to PE accordingly. It can be an issue if you have illiquid assets in a fund that promises liquidity, Woodford and some UK real estate funds being prominent examples. The vast majority of PE funds are set up with a 10+ year fund life to avoid being forced to sell. PE funds and their investors can still get themselves into trouble but I think it is case specific rather than systematic.
For context, the entire PE industry is $3trillion somewhere around 2-3% of the global economy. Number varies depending on what type of PE you include. Apple's market cap is $2 trillion. PE funds are set up as independent structures, there is a lot of variance in what they invest and their investor base. It is difficult to see why a US fund investing in US business with mostly US investors should be impacted in the same way as a EU fund investing in the EU with mostly EU investors (home bias is not unusual), unless it is a global economic crash but that would hardly be limited to PE alone.
On the Monzo example, that is venture capital for you. A VC fund can still be a success if 2 out of 30 companies are massive successes. In a way the idea is to try lots of things and hope something works.
A certain large fund gathering lots of publicity is to PE what Foffa is to LFGSS.
If you look at coverage of PE on IPE and other investment industry publications, you will find a lot of questions around PE performance, how it is measured and how PE will perform given the increased competition.
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ChasnotRobert
hesa
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I think private equity is set to be the next global horror story. The entire industry is built on the predication that there will be a bigger PE fund to come exit you or an IPO. Both options are getting rarer and rarer.
Their investments are all in high risk and high growth businesses where the route to growth is moving money from business X to Google/Facebook. I think it's something like 53% of all PE money ends up there.
Fine in theory, let them lose it, but when you follow the money back up the chain it gets a bit murky. There are too many people with too much skin in the game for these things to not continue to proliferate and collapse, but I have a feeling it will.
PE is basically operating the entire lower runs of business investment and taking these away will be problematic. It'll spread quickly up the chain IMO.