If you're a junior banker hoping to move into private equity, you will already be aware that the industry is not what it was. The Financial Times says private equity assets under management fell for the first time in decades in 2024. Funds have been cutting partners. With exits deals hard to come by there are "pockets of distress" on existing investments. “The days of writing checks and waiting for an exit and your money back is over,” the managing partner at one private capital fundraising firm informed Bloomberg in January. 

Get Morning Coffee ☕ in your inbox. Sign up here.

If you work in private equity, what are you supposed to do? One large cap private equity professional thinks he has an answer: complexity. 

It's become increasingly difficult to generate alpha using the historic "buy, fix, sell" model or even the newer "buy, tweak, sell" model, says the anonymous private equity professional behind the Restructuring_ X account. Management teams know more than operating partners; fixes and tweaks that will boost a sale price have usually been tried. Nor is it possible to negotiate a price advantage when purchasing an asset: most funds have the same information and the same analytical processes. They're also planning to hold the asset for the same period of time (five years). So where's the differentiation?

Complexity, he says. "Deals are complex for a reason and an incremental skillset is required to understand and analyze the situations. In addition, these deals have a greater chance of resulting in capital impairment, a risk that many firms are simply not willing to take (and higher upside on the other hand)." Complex deals are more risky, more complicated (yes), and have greater opportunity to generate alpha if you get them right. 

What does a complex deal look like? Try Sycamore's recent $24bn bid for distressed retail chain Walgreens Boots Alliance Inc. It has complexity upon complexity, including online competition, expensive opioid settlements, and a failed foray into offering clinical services. 

The Walgreens business is complicated and genuinely needs to be fixed, says Restructuring_. "There is not a second year associate going through the data room to compare churn across the different SaaS offerings, there is true operational and legal complexity that needs to be diligenced and understood before pulling the trigger here." The opioid claims need to be properly understood, the business needs to be split into three (the U.S. retail pharmacy, Boots UK, and U.S. healthcare). Real operating work needs to be done.

What does the dawn of the hyper-complex deal mean for private equity professionals? That the job is more interesting. But it's also harder work, more enmeshed in legal details, and more risky. Returns may still be possible; you're going to have to sweat.

Separately, Mike Platt's hedge fund/family office BlueCrest has had a fine start to the year, but something seems to have happened to its pods. The Financial Times reports that BlueCrest returned 15% in the first few months of this year by virtue of FX and bond market bets. This looks impressive given the losses in some pods at other funds. 

While BlueCrest is thriving, however, some of its portfolio managers seem to have either fallen by the wayside or been consolidated into its larger pods. Last year, the FT reported that BlueCrest had "roughly 170 pods" and that it was "expanding trading teams."  Now, the FT says it has 140 pods. Not that it seems to have affected performance. 

Banks stocks fell yesterday, with Morgan Stanley and Goldman Sachs slipping 6.4% and 5%, respectively. Shares in private investment groups KKR and Ares shed 6.2% and 8.9%, respectively. (Financial Times) 

Oliver Wyman thinks it will be a difficult two years for German banks as loans sour. (Bloomberg) 

Barclays hired John Kolz from Royal Bank of Canada to co-run global equity capital markets. (Bloomberg)

Christian Stranger, who's worked in ECM at Goldman Sachs for nearly 30 years, is retiring. (Bloomberg) 

Trump's meme coins were lucrative for someone: the stock of 831mn $TRUMP coins still held by Trump-linked accounts currently has a notional value of $9.3bn. (Financial Times) 

BlackRock's Rupert Harrison was in a band: “We were called The Full Monty, which was a great name until the film came out and people started to think we were strippers. We played angsty rock and thought we were the successors to Radiohead.” (Financial News) 

Jes Staley is not happy with the Financial Conduct Authority: “The FCA took the most serious and drastic step that it could, ending my long and distinguished career in financial services and destroying my reputation.” He also says he wasn't Jeffrey Epstein's only friend in finance: “I have no doubt, as a result of knowledge of the financial services industry, that a number of senior investment bankers at JPM and at other institutions will have engaged in extensive email correspondence with Mr. Epstein..."  (Bloomberg)  

Heavy use of ketamine - several times a week—has been linked to cognitive effects that last beyond the high, including impaired memory, delusional thinking, superstitious beliefs, and a sense of specialness and importance. (The Atlantic) 

Photo by Elimende Inagella on Unsplash

, or email [email protected]. Signal also available.

Bear with us if you leave a comment at the bottom of this article: all our comments are moderated by human beings. Sometimes these humans might be asleep, or away from their desks, so it may take a while for your comment to appear. Eventually it will – unless it’s offensive or libellous (in which case it won’t.)