YWR: Do you know what your PE Fund is up to?
Disclosure: Personal views only. Definitely not investment recommendations or advice. For that seek professional help.
Pension funds and endowments have a blindspot. And it’s 30-50% of their portfolio.
With their public equities they know the price of each holding second by second and every 3 months get a full accounting of each business and where it’s going. Usually there’s a management call too.
Direct assets like real estate are similar. A fund knows the cashflows on their buildings and whether those cashflows should be reinvested in upgrades or upstreamed to the fund.
But with the PE and VC allocations, which typically make up more than 50% of the fund, it’s almost the complete opposite.
“Here’s a check for $100mn. I hope you do good things with it and I can get the money back in 7 years. I look forward to the newsletters..”
Think about it in terms of media coverage too.
For public stocks we have CNBC, the WSJ, the FT..Twitter. We are drowning in noise about public stocks, but the $12 trillion dollar private asset market?
Almost nothing right?
It strikes me as weird. I wouldn’t be surprised if in the future PE and VC funds move to become Business Development Companies (BDC’s) to increase disclosure.
In the meantime though, I did a little YWR data analysis on what PE + VC funds have been up to over the last 19 months (2022 through August 2023).
Let’s go through a few insights and see what’s interesting.
YWR Private Equity Database
I downloaded data on 1,439 deals from Jan 1, 2022 to Aug 1, 2023.
2022 and early 2023 were difficult months in the public markets and investor fear was high. Let’s see which funds were the most active even when things were uncertain.
FYI, for subscribers there is a link to download the full YWR PE Activity database at the bottom of the email.
Top 30 most active funds by deal activity
The Blackstone activity was primarily one deal, Mileway, which we will discuss below.
AH Investments is Andreessen Horowitz which didn’t skip a beat and participated in $17bn worth of deals across 49 transactions and was the second most active fund globally. They are still highly involved in Web3 companies (crypto).
SB Investments is SoftBank.
The Microsoft activity is primarily the $10bn OpenAI deal
I’d never heard of General Catalyst, but they were very active. Same with D1.
Top 20 Deals
In February 2022 Blackstone announced the largest private real estate transaction ever…their $21bn investment into Mileway. News to you right? That’s what I’m talking about. Who’s ever heard of Mileway?
It turns out Mileway is a large European logistics property company and owns 14 million sq feet of warehouses across Europe. Now they have another $21 bn to become even bigger. It’s a property e-commerce play.
The OpenAI deal we know about. $10bn is massive…
Stripe raised $6.5bn and many funds participated.
Canada’s CPDQ pension fund invested $5 billion directly into stakes in several DP World ports. This is the trend of pension funds, skipping PE/VC middlemen and buying assets directly.
SpaceX raised another $1.7bn. Amazing how Elon is building out integrated global communications infrastructure from space rockets (SpaceX) to satellites (Starlink) to media (Twitter). I have a sense this all comes together somehow.
The $1.5bn Fanatics deal is interesting too. Fanatics specialises in professional sports merchandise. They have a business call V-Commerce (vertical e-commerce) where they have licenses to create sports gear for a variety of major league teams (NHL, NFL, NBA). They own their own manufacturing and can quickly make sports fan merchandise in response to new events (t-shirts or hats to celebrate making a playoff, jerseys with the name of a new player who is quickly getting fame). Their advantage is in being nimble.
Fanatics are also starting a US retail sports betting business (similar to William Hill). I’m sure this is what is getting the PE firms excited.
It looks like a Hooters, but with sports betting. Brilliant. I’m sure it will be a massive hit.
Then at the bottom of the list at #20..there is Anduril…
The Anduril Deal
I was thinking…..
With all the excitement about AI and Drones….shouldn’t someone come up with an AI company to control the drones?
Aren’t we at the point where there should be Cyberdyne Systems and Skynet? Wouldn’t that be a great idea for a PE/VC backed company? Just combine all the trends into one thing.
Well…they did. It’s Anduril and they just raised $1.5bn from all the leading PE firms. It turns out Skynet will be brought to you by a PE fund.
Cyberdyne Systems = Anduril
Skynet = Lattice Solutions
Anduril’s founder Palmer Lucky decided to take his $2bn from selling Oculus to Facebook and create an AI company for the defence industry.
The idea is the modern battlefield with its increasing drone on drone warfare is getting too complicated for humans to manage. There needs to be an AI to monitor all the incoming drone threats and then dispatch the myriad of counter drone attacks. There can be a human in the control room monitoring things (with a cup of coffee), but Lattice does all the work.
It’s really worth watching this 2 min video on how it works.
Anduril will destroy us all, but will probably make a lot of money.
It made me interested in the smaller funds involved in the deal and if they were doing anything else interesting.
Other Thalia, Marlinspike and FJ Lab Deals
FJ Labs looks pretty cool.
YWR Public Service Announcement
There has been interest from funds wanting a group membership to YWR. There are a few different ways to do this. Just reach out to me and we can make it happen.
Alright. Time to go and meet some mates for a Friday drinks.
Have a good weekend and be polite to the AI’s. They will remember who was nice to them.
Erik
Below is a link for subscribers to the full Private Equity and VC Activity Database: