We Study Billionaires - The Investor’s Podcast Network

TIP663: The Truth About Private Equity w/ Ted Seides

Sep 27, 2024

Ted Seides, former president and Co-CIO of Protege Partners, dives into the evolving world of private equity, detailing its growth to a $6 trillion powerhouse. He explains why private equity outperforms public markets and shares insights from history-making deals, including Apollo's Yahoo acquisition. Ted tackles the industry's reputation, emphasizing the complexities often overlooked by the media. He also discusses how interest rates influence private equity strategies and who should consider investing in this dynamic sector.

01:07:27

Episode guests

Ted Seides

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Quick takeaways

Private equity has transformed from a niche industry to a dominant force in the global economy, now valued over $6 trillion.

The ability to directly manage acquired companies allows private equity firms to implement strategic changes and drive profitability improvements effectively.

Despite criticisms regarding negative impacts on employment, many private equity firms focus on operational growth and revitalizing struggling businesses.

Deep dives

The Growth of Private Equity

Private equity has experienced significant growth over the past 20 to 30 years, evolving from a niche industry to a major player in the global economy. Initially, private equity was restricted to a small group of leading institutions, focusing primarily on acquiring private companies. However, the financial crisis catalyzed a shift as institutions sought higher returns, leading to increased capital flow into private equity. As interest rates dropped and traditional fixed-income investments underperformed, more institutions began allocating a larger portion of their portfolios to private equity, recognizing its ability to provide sustained returns.

Capitalism Thrives Where Risk is Embraced

01:33

Understanding Private Equity's Rise

01:08

Intro

3min

The Rise of Private Equity: A Transformative Journey

15min

Rethinking Private Equity: Beyond the Bad Reputation

6min

Navigating Private Equity: Insights and Impacts

13min

Optimizing Financial Solutions for Small Businesses

8min

Reviving Struggling Brands: The Private Equity Playbook

16min

Insights into Private Equity and Special Anniversary Announcement

2min

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.

IN THIS EPISODE YOU’LL LEARN:

00:00 - Intro

02:04 - What has led to the growth in private equity over the past few decades?

06:39 - Why David Swensen referred to private equity as a superior form of capitalism.

08:47 - Why private equity has outperformed public equities as an industry.

14:19 - How the lock-up period in private equity impacts returns.

18:03 - Ted’s take on why private equity has been given a poor reputation.

28:34 - The importance of pricing to the seller in a private equity deal.

30:17 - How interest rate hikes have impacted private equity.

32:17 - An overview of KKR’s “perfect private equity deal.”

38:27 - An overview of Apollo’s purchase of Yahoo in 2021.

49:34 - An overview KPS Partners’ purchase of TaylorMade.

57:24 - What types of investors should consider an allocation to private equity?

59:18 - Ted’s portfolio allocation.

And so much more!

Disclaimer: Slight discrepancies in the timestamps may occur due to podcast platform differences.

BOOKS AND RESOURCES

Join the exclusive TIP Mastermind Community to engage in meaningful stock investing discussions with Stig, Clay, Kyle, and the other community members.
Ted’s book: Private Equity Deals.
Ted’s book Capital Allocators.
Capital Allocators Website & Podcast.
Follow Ted on Twitter & LinkedIn.
Related Episode: TIP444: The Changing World of Endowments & ESG Investing w/ Ted Seides.
Mentioned Episode: TIP654: Investing Across the Lifecycle w/ Aswath Damodaran.
Follow Clay on Twitter.
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