TIP663: THE TRUTH ABOUT PRIVATE EQUITY

W/ TED SEIDES

26 September 2024

On today’s episode, Clay is joined by Ted Seides to discuss his new book — Private Equity Deals: Lessons in investing, dealmaking, and operations from private equity professionals.

Over the past 20 years, the private equity industry has gone from a cottage industry to a powerful juggernaut that touches every corner of the global economy — now totaling over $6 trillion.

Ted is the former president and Co-CIO of Protege Partners, and prior to that, he was a senior associate, working under investing legend David Swensen at Yale. He is the host of the popular podcast — Capital Allocators.

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IN THIS EPISODE, YOU’LL LEARN:

  • What has led to the growth in private equity over the past few decades?
  • Why David Swensen referred to private equity as a superior form of capitalism.
  • Why private equity has outperformed public equities as an industry.
  • How the lock-up period in private equity impacts returns.
  • Ted’s take on why private equity has been given a poor reputation.
  • The importance of pricing to the seller in a private equity deal.
  • How interest rate hikes have impacted private equity.
  • An overview of KKR’s “perfect private equity deal.”
  • An overview of Apollo’s purchase of Yahoo in 2021.
  • An overview KPS Partners’ purchase of TaylorMade.
  • What types of investors should consider an allocation to private equity?
  • Ted’s portfolio allocation.
  • And so much more!

TRANSCRIPT

Disclaimer: The transcript that follows has been generated using artificial intelligence. We strive to be as accurate as possible, but minor errors and slightly off timestamps may be present due to platform differences.

[00:00:00] Clay Finck: On today’s episode, I’m joined by Ted Seides. Ted is the host of the popular podcast, Capital Allocators, and the author of the new book, Private Equity Deals. Over the past 20 years, private equity has grown from a cottage industry to a powerful juggernaut that touches every corner of the global economy.

[00:00:18] Clay Finck: Totaling over five private equity constitutes an important investment allocation for public and corporate pension funds, university endowments, nonprofit foundations, insurance companies, families, and sovereign wealth funds worldwide. According to Hamilton Lane data via Cobalt, over the 20 years ending December 31st, 2022, the entire private equity industry generated a compounded time weighted return of 14.6 percent per annum, surpassing the 9. 8 percent return of the S&P 500 net of all fees and expenses. During this episode, Ted and I chat about what has led to the growth in private equity over the past few decades, why David Swensen referred to private equity as a superior form of capitalism, Ted’s take on why private equity has been given a poor reputation, an overview of KKR’s perfect private equity deal. Apollo’s purchase of Yahoo!, and KPS partner’s purchase of TaylorMade, what types of investors should consider an allocation to private equity and so much more. With that, I hope you enjoy today’s conversation with Ted Seides.

[00:01:25] Intro: Celebrating 10 years and more than 150 million downloads. You are listening to The Investor’s Podcast Network. Since 2014, we studied the financial markets and read the books that influence self-made billionaires the most. We keep you informed and prepared for the unexpected. Now for your host, Clay Finck.

[00:01:53] Clay Finck: Welcome to The Investor’s Podcast. I’m your host, Clay Fink. And today I’m happy to welcome back Ted Seides to the show. Ted, it’s great to have you back on the show.

[00:02:02] Ted Seides: Thanks, Clay. Great to be back on.

[00:02:04] Clay Finck: Well, Ted, you’ve been on the show a couple of times to discuss how elite money managers invest as well as the world of endowments and hedge funds.

[00:02:12] Clay Finck: But today we’ll be speaking about private equity. You just released this new book titled private equity deals, lessons in investing deal making and operations from private equity professionals. So private equity, it’s grown to become this massive industry, 6.5 trillion and attracted a lot of attention over the years.

[00:02:33] Clay Finck: And we’re going to be sifting through your perspective on this because you’ve chatted with a number of industry professionals. And I think a lot of people just sort of see what’s happening in the headlines and see what’s happening on Twitter and whatnot with regards to an industry like private equity.

[00:02:47] Clay Finck: So let’s start with, in your view, how has this industry developed over the past 20 to 30 years and what’s led to this increase in popularity?

[00:02:57] Clay Finck: Well, if you go back that period of time, it really was sort of a cottage industry. Wasn’t that large in asset size. It was mostly the provenance of capital by some leading institutions.

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