Sunday, February 08, 2009

"Enough of draw down"

say the Limted Partners (investors) in PE funds to the Fund Managers that let them down.

When I titled this blog as “General Partners V. Limited Partners” , it was pretty much apt for the situation then. General Partners that make the most critical investment decisions in their PE funds were held accountable for its outcome by the Limited Partners that funnel those funds. When investments don't yield desired returns, it's time for GP's to brace up for an LP interrogation, often that ended in LP deserting the funds and GP's earning a bad reputation. In the PE small world, word is out fast and that means near death for the GPs. They can't hop jobs so easily.

Now the situation has been upended. The new flip is that the Limited Partners are advising the General Partners not to press draw downs. May be, it's the liquidity crunch and absence of leverage that chokes many a LP funnel. But I like that in one way because somewhere the indiscretion has to end. The choice of investments they make is abysmal. Worse is the follow up supervision and near absence of timely strategic interventions. It’s not buy and hold anymore, buy and sleep seems to be the strategy for some.

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