The sun is shining, the Red Sox season is mercifully over and at least one of the PE Week Wires endorsed candidates will win office this November (since hes officially running against Rep. Mark Foley). In other words its time for Monday Mouth-Off.
First up are some emails about the AA Capital situation, in which the Chicago-based private equity firm stands accused of defrauding its union pension fund clients. Jarvis writes: The primary villain here is obviously Orecchio, but youre right to call out the CFO as well. How can an asset manager with over $100 million in client funds not keep a general ledger, or at least inquire as to the justification for outrageous expense reports? Forget breach of fiduciary duty. Thats a breach of common sense.
Elaine also chimes in on the CFO issue: You once wrote that CFOs should stand up and become more integral parts of their firms decision making. Perhaps the CFO at AA Capital needs to begin by setting her sights a bit lower.
R: While you don’t condone the majority GP actions you can understand it and you save your inspection for the people who were the smaller GPs for not blowing the whistle. Reverse your thinking–I can understand why the minions did not blow the whistlebut my vitriol is reserved for the main bad actor. Im with you R, and garbled my message. The point I wanted to make was that Orecchios motive was obviously greed and, if convicted, he will deserve the penalties he pays. But what was the motive for the other partners to cover for him? This second part just confuses me a bit more than does greed. Still not sure I’m explaining this well…
*** Pat on Parthenon Capitals fundraising travails: When Parthenon launched this fund, Atkins had just hit the skids and the overall fund performance was so-so. It wasnt until nine months into the fundraising that a couple of big exits were executed and dramatically boosted returns as Parthenon had anticipated. However, in a busy market, many LPs had either literally said no or had mentally gone on to the other deals in their rapidly growing pile of PPMs that threatens to overwhelm their desks. Getting prospective LPs to revisit stale deals is very difficult. Given Atkins, they would have been better placed to have held of launching the fund until those deals had exited, launching on the back of good new.
*** Chris on last Friday’s fundraising advice: As someone who has been on both the LP and GP side of the table,I would agree that an excellent way to get a LP’s attention is to be introduced through a successful GP relationship. That said,I would also argue that the best way is to get a LP’s attention is toberecommended by one of your existing, reputableLPs. It has been my experience that most LPs place a lot of confidence in a GP recommendation from another reputable LP.
*** Francis chimes in on the NY Times piece about a possible rift between KKR and Blackstone, and my use of the term intentional uncooperativeness.” He writes: Doesnt that sound almost like [gulp] competition? Point taken.
*** Finally, a big thanks to everyone who participated in our Reader Survey. So let me tell you a bit about yourselves:Most ofyou are men, with just over 50% being between the ages of 18 and 34 years-old. A majority is married, and travels multiple times each month. You also are wealthy, with just 18% reporting annual household income of under $100,000. Forty-five percent report household income in excess of $201,000, and it seems we have plenty of millionaires and multi-millionaires. There is a near-even split between VCs and LBO pros, with a healthy number of consultants and I-bankers.
I was a bit surprised to see that nearly 90% of readers are based in the U.S., although the highest geographic concentrations were to be expected: New York Tri-State in first place, followed by virtual tie between Boston and San Francisco Bay. The best part, however, is that most of you read this publication each day, and 67% of you have been subscribers for more than one year. As always, you are most appreciated.