Marc Patterson’s Post

« On the surface, family offices are dream clients for alternatives. For years, family offices sought basic wealth preservation with traditional stocks-and-bonds portfolios. Now they’re more like institutional investors, seeking higher long-term returns with private equity, venture capital, hedge funds, infrastructure and real estate. Family offices have the highest allocation to hedge funds of any type of institutional investor, according to Preqin » #familyoffices #cnbc #investments #family

According to recent Preqin data, family offices have tripled since 2019, and continue to become more sophisticated investors. For years, family offices sought basic wealth preservation with traditional stocks-and-bonds portfolios, and now they act more like institutional investors, seeking higher and longer-term returns through private equity, VC, hedge funds and real estate. And some are even more proactive, moving away from passive, "blind" investing (e.g., making investments as a limited partner into closed-end private funds) and toward more customized, direct investment strategies.

Two interesting, overlapping insights from this one: 👨👩👦 The rise of family offices -- which have tripled since 2019 and represent about $6T AUM. 👉 These offices are increasingly more likely to want to invest direct as opposed to via fund managers or syndicates. The reasons: high risk tolerance, lower costs of deal execution, and an emphasis on value- or goal-driven investing. 🤝 This forms a nice pairing with venture studios. Studios provide leverage to FOs as well as alpha, while FOs don't mind the complex fund structure which takes a while to play out. #venturebuilding #venturestudios

The number of family offices in the world has tripled since 2019, setting off a new race among private equity firms, hedge funds and venture capital firms to attract their investments. According to a new report from Preqin, the number of family offices — the private investing arms of wealthy families — topped 4,500 worldwide last year. North America has the largest share of family offices, with 1,682. More than half of all the family office assets in the world are in North America. https://lnkd.in/gkSC488E Experts say family offices now manage $6 trillion or more, and their ranks are growing. There are more than 2,600 billionaires in the world, almost all of them requiring a family office. And the number of people in the world worth $100 million or more — the typical threshold for a family office — has surged to more than 90,000, according to Wealth-X, an Altrata company. In other words, there is more room to run. The family office boom has caught the attention of private equity firms and other alternatives managers who are looking to raise funds. Blackstone, KKR and Carlyle have all been expanding their teams, funding events and building products catering specifically to family offices. “The larger private equity managers are trying to compete there by putting in resources and time,” said Rachel Dabora, research insights analyst at Preqin. “Ultra-high-net-worth investors and family offices are really on their radar.” On the surface, family offices are dream clients for alternatives. For years, family offices sought basic wealth preservation with traditional stocks-and-bonds portfolios. Now they’re more like institutional investors, seeking higher long-term returns with private equity, venture capital, hedge funds, infrastructure and real estate. Family offices have the highest allocation to hedge funds of any type of institutional investor, according to Preqin. Granted, the past two years have been tough on private equity, venture capital and many hedge fund returns. More than half of the family offices that Preqin surveyed said they have been disappointed with their venture capital returns, while a third have been disappointed with private equity. Yet they remain hopeful for this year and beyond, with a majority saying private equity and venture capital will do better over the next 12 months. Private equity firms are going after the family office market aggressively. Blackstone, which has served wealthy individuals for decades through its Private Wealth Solutions business, is ramping up its Private Capital Group, which serves family offices, billionaires and the largest, most sophisticated individual investors. That team has doubled to 25 people over the past few years and is likely to keep growing, according to Craig Russell, global head of Blackstone’s Private Capital Group. “We view this as a substantial and growing opportunity for Blackstone,” Russell said.

The quest for private markets liquidity continues... Per PitchBook, Hamilton Lane recently closed a $5.6B secondaries fund - its largest fund to date. If institutional LPs in private equity and late-stage venture capital funds are wondering where liquidity opportunities are going to come from - secondary funds like this are a likely candidate. Tight capital markets have made exit opportunities very challenging. However, there is a standard ten year structure on most private equity and venture capital funds. The liquidity has to come from somewhere (and sooner rather than later). While investors may not be thrilled with some of the valuations, secondary funds like this will likely play a significant role in getting the exit landscape up and running again. Endeavor Colorado #privateequity #venturecapital #founders #entrepreneurship #innovation #investing #startups https://lnkd.in/gK-9CNcW

New Post: A Rough Climate for PE Exits Leads to a Spike in Continuation Funds - Private equity firms, in part because of how their funds are structured, tend to be temporary investors. They buy companies, execute a strategy aimed at maximizing their value and exit, hopefully at a valuation greater than they paid going in. Limited partners go along for the ride in the hope of reaping the benefits. But for many funds, the interest rate landscape and other market conditions are drastically different now than when they were launched, leading to the rise in popularity of continuation funds or vehicles (CVs). In these deals, rather than sell the company to another investor or go public as a fund reaches its target exit date, the original sponsors opt to hold onto their investment, rolling it into a new fund with a timeline of another five to seven years. At that point, LPs in the original deal are typically given the choice to cash out or roll over into the new fund. Related: The Private Equity PlaybookFor the majority of individual investors, cashing out from the original fund continues to be the preferred option in a market with liquidity challenges. But those who can afford to keep their money tied up for another few years and feel the assets going into the continuation fund have room for significant further growth find it an attractive proposition. The strategy has the potential to offer continuation fund participants alpha returns with a narrow focus on a few prime holdings, while avoiding a forced disposition of assets in what might be an unfavorable environment. For primary fund LPs, it also serves as another mechanism to access liquidity. Given current market conditions, continuation funds have become an increasingly popular strategy among both GPs and a select set of high-net-worth investors, according to industry observers. Related: Private Equity Funds Are Borrowing Against Themselves, With the Help of InsurersContinuation funds “used to be an ‘Island of Misfit Toys’ for underperforming assets, but now they can contain prized private opportunities,” noted Nicholas Brown, managing partner with Granite Harbor Advisors, a Houston-based independent registered advisory firm, in a written response. “This supports our idea that more companies are looking to stay private longer and will wait to access the public markets as an exit opportunity for early investors rather than as a primary means of raising capital. That at least warrants a closer look at continuation funds when the opportunity arises.” Similarly, Nick Zamparelli, senior vice president and chief investment officer with investment advisory firm Sequoia Financial Group, wrote that in the past, sponsors had been known to use continuation funds to hold onto problematic or distressed assets they could not sell. Since the funds are now being used to allow sponsors to hold well-performing assets until a better-timed exit and give

💼 Unlocking Opportunities: The Vital Role of Smaller Private Equity Firms in the Fund Space 🌟 When it comes to private equity, the spotlight often shines on the giants with multi-billion-dollar Assets Under Management (AUM). However, let's not overlook the invaluable contributions of smaller firms with AUM under 10 billion. These firms may be smaller in size, but their impact is anything but insignificant. Here's why they play a crucial role in the fund space: Niche Expertise: Smaller private equity firms often specialize in niche markets or industries, leveraging their deep expertise and insights to identify unique investment opportunities that larger firms might overlook. This specialization allows them to create value in ways that larger firms cannot. Agility and Flexibility: With fewer layers of bureaucracy and decision-making processes, smaller firms can act swiftly and nimbly in response to market dynamics. This agility enables them to capitalize on emerging trends, adapt their investment strategies quickly, and seize opportunities that arise, giving them a competitive edge in the ever-changing landscape of private equity. Relationship-driven Approach: Smaller firms prioritize building strong relationships with investors, portfolio companies, and other stakeholders. This personalized approach fosters trust, transparency, and collaboration, leading to deeper partnerships and alignment of interests. In an industry where relationships are paramount, smaller firms excel at cultivating long-term connections. Entrepreneurial Spirit: Many smaller private equity firms are founded and led by entrepreneurs themselves, bringing a unique perspective and entrepreneurial spirit to their investment approach. They understand the challenges and opportunities faced by entrepreneurs and are better equipped to provide hands-on guidance, strategic support, and value-added resources to help portfolio companies thrive. Driving Innovation: Smaller firms are often at the forefront of innovation, pioneering new investment strategies, structures, and approaches. Their willingness to think outside the box, take calculated risks, and challenge conventional wisdom drives innovation within the private equity industry, pushing the boundaries of what's possible and shaping its evolution. At Kress Street Capital, we embody these qualities and more. While we may not have billions in AUM, our passion, dedication, and commitment to excellence are second to none. We pride ourselves on our ability to uncover hidden gems, forge meaningful partnerships, and deliver exceptional results for our investors and portfolio companies alike. So, the next time you think about the private equity landscape, remember the vital role that smaller firms with less than 10 billion AUM play. They may be small in size, but their impact is mighty, shaping the future of the fund space one investment at a time. 💡 #PrivateEquity #Investment #Entrepreneurship #Innovation #ValueCreation

🚀 Exciting News in the World of Private Equity! 🚀 Based on this article, it looks like the optimism for turning the faucet back on for #privateequity fundraising is revived, and lower middle market seems to be what is taking center stage in 2024. (Woohoo for the majority of our clientel!) Here's my recap if you don't want to dig through the article! ✨ Key Insights: *Smaller operators motivated to sell are driving M&A volume in the lower middle-market. (So if you are lower middle-market and looking for a nice liquidity event, this may be your year!) *Larger funds are winning over LPs with brand names and diversified strategies. 📉 Recap of Last Year: *PE fundraising numbers suffered due to high interest rates and geopolitical headwinds. 🔍 Looking Ahead: *Placement agents and advisors anticipate a better year for private equity fundraising as M&A activity recovers, to an extent. 💰 Lower Middle-Market Trends: *Despite "market calamity," lower middle-market firms are still seeing deals and exits as founders of smaller companies are motivated to sell. 💼 Winning Strategies: *Private equity managers operating multibillion-dollar funds are winning mandates with international investors, emphasizing the safety of brand names and well-diversified strategies. The article is cautiously encouraging. :) Who else is excited to see what 2024 holds for the private equity landscape?! #privateequity #MergersAndAcquisitions #MandA #AcquisitionStrategy #DealMaking

McCarthy Capital Successfully Closes $870 Million Fund VIII 💼💰 Omaha-based growth equity firm, McCarthy Partners Management, LLC, has proudly announced the final closing of its McCarthy Capital Fund VIII, L.P., securing an impressive $870 million. This private equity fund is set to invest in flourishing, lower middle-market companies. 📈🌐 Key Highlights: ✨ Successful Fundraising: McCarthy Capital's Fund VIII exceeded its initial target, garnering strong demand and becoming oversubscribed. The fund surpassed its goal of $700 million, highlighting investor confidence and interest in the firm's approach. 📊💪 Investment Focus: The fund will prioritize investments in established companies showcasing profitability and promising growth prospects. 🚀💹 Investment strategies include growth equity investments, management buyouts, and recapitalization. McCarthy Capital emphasizes supporting companies with conservative capital structures and leveraging its resources to drive accelerated growth through value-creation initiatives. 🌱💡 Partnership Approach: McCarthy Capital maintains a disciplined commitment to its mission of fostering business growth in collaboration with management teams that retain significant ownership and operational control. 🤝📈 Over the years, the firm has forged over seventy partnerships with closely-held businesses, emphasizing its dedication to supporting companies seeking an experienced capital partner. 💼🌟 Acknowledgments: Patrick Duffy, President and Managing Partner of McCarthy Capital, expressed gratitude, “We are thankful for the continued support of our long-term partners as well as the opportunity to partner with new institutional investors, all of whom enabled us to complete this capital raise quickly.”. 🙏🚀 About McCarthy Capital: 🌐 McCarthy Partners Management, LLC, operating as McCarthy Capital, is a registered investment advisor headquartered in Omaha, NE. With a dedicated focus on lower middle-market companies, the organization boasts over 35 years of experience in partnering with founders, families, and exceptional management teams to fuel company growth. 🌟📊 In conclusion, McCarthy Capital's successful closing of Fund VIII underscores its enduring commitment to supporting and accelerating the growth of lower middle-market companies, solidifying its position as a trusted and experienced capital partner. 💼🚀 ✅ Looking to raise capital for your #fund and increase the international pool of your LP #investors?   🤝 Need warm #LP introductions?   📝 Selling #secondaries to increase liquidity?   🧐 Looking for co-investments?   ▶ G+QUANT's link for inquiries and fund decks: https://lnkd.in/gjC_EuTE #McCarthyCapital #PrivateEquity #FundVIII #LowerMiddleMarket #Investment #GrowthEquity #ManagementBuyouts #Recapitalizations #CompanyGrowth #OmahaBased

A highly insightful article in the The Wall Street Journal and I recommend all the LPs I have met around the globe seeking middle market private equity to read this article & track this manager as the US remains the ideal market for this strategy in spite of the proliferation & clouding of fund managers & capital over the past decade. I have heard this was one of the fastest first-time private markets fundraises in recent memory & it is no secret that limited partners around the globe are prioritizing the lower-middle market of private equity in the United States. Missouri-based Agellus Capital raises its initial fund $400 million (above $350 million target) to back smaller companies providing essential services. With a large institutional anchor & less than 10 LPs, the former executives from middle market PE firms St. Louis-based Thompson Street Capital Partners & Boston-based Audax Private Equity have previously closed nearly 100 transactions & seek businesses of $2 to $20 million of EBITDA, aiming to triple size during investment period via organic and M&A growth, essentially building upon a playbook and track record under established managers. This is the proper, well-founded emerging manager strategy we seek, and the opposite of the mass "overnight fund manager" ill-fated phenomena of the past decade. Congratulations to Agellus Capital and their capital advisor Aviditi Advisors! #alternativeassets #privatemarkets #privateequity #middlemarket #limitedpartners #capitalmarkets #fundmanagers #fundraising #emergingmanagers