Stalled Venture Capital Funds Scramble to Find Cash for Impatient LPs

Lack of exits, as IPOs are infrequent, has VC managers selling part of their stakes to others, but at a discount.




Venture capital has struggled to get back on its feet after a tough 2022. While fund-raising recovered 37% in this year’s first quarter versus 4Q2022, exits still lagged, by EY’s reckoning. So cash distributions to VC limited partner investors has have been curtailed.

As a result, some VC funds have taken to raising cash via selling stakes in their portfolio companies on secondary markets, according to PitchBook research.  

Thus far, the research firm indicated in a report, this has seen only limited success, as buyers are only interested in taking a piece of the fund’s best assets, thus limiting the cash generated to ship to impatient limited partners. And the stakes that go to secondary investors are often sold at a discount to their value and could lead to marking down portfolios.

For newer VC funds, the ratio of distribution to paid-in capital, which measures how much money a fund returns to LPs compared to what they invested, has flagged. For instance, for funds that launched in 2016 and 2017, just 40% has been returned. The average prior to 2016 is 80%.

Want the latest institutional investment industry
news and insights? Sign up for CIO newsletters.

LPs had “expected many companies to go public by now, but now it looks like it may be three or four more years until they can,” the report found. Initial public offerings are in the doldrums nowadays. According to an EY report, using Dealogic statistics, just 33 companies had an IPO in 1Q2023, only slightly better than the comparable 2022 period’s 28. Those results are tiny compared with showings in prior years.

Unfortunately, the steep discounts to sell in the secondary market, outside of a few star startups companies in the funds’ portfolios, are making the exercise hardly worth the trouble.

Too often, the Pitchbook report stated, “investors have no interest in buying secondary stakes in a whole bunch of companies, even if current backers would sell them at a more than 90% discount.” In the VC universe, secondary sales “activity is still limited to the top 50 to 100 names.”

Related Stories:

Venture Capital Is in the Dumps, But the Money Keeps Rolling In

Private Equity, Venture Capital Outpace Public Equities in 2022 Higher Education Endowments

Investing in Bitcoin Is Like a Venture Capital Play, Virginia Pension Chiefs Say

Tags: , , , , , , ,

Oaktree Capital CEO Jay Wintrob to Step Down in 2024

The $172 billion alts investment manager taps Robert O’Leary and Armen Panossian as co CEOs.

 




Oaktree Capital Management announced that CEO Jay Wintrob will retire during the first quarter of 2024, and that Robert O’Leary and Armen Panossian will succeed him as co-CEOs.

O’Leary is portfolio manager for the alternative investments manager’s global opportunities strategy, and Panossian is Oaktree’s head of performing credit. They will assume their new roles when Wintrob departs next year.

Oaktree, which has approximately $172 billion in assets under management, said the new CEOs will focus mainly on overseeing the organization and on performance of the firm’s investment teams, while continuing to lead two of its key investment areas. The company also said that as part of the transition it has named General Counsel and Chief Administrative Officer Todd Molz as chief operating officer to oversee the day-to-day management of the firm, with all non-investment functions reporting to him.

O’Leary, Panossian, and Molz will join the executive committee, along with Co-Chairmen Howard Marks and Bruce Karsh, and Vice Chairman John Frank.

Want the latest institutional investment industry
news and insights? Sign up for CIO newsletters.

“We’re delighted to elevate these three outstanding, long-tenured Oaktree professionals,” Marks said in a release. “With 54 years of combined experience at the firm, they exemplify the Oaktree culture, with its emphasis on risk control and taking the high road.”

O’Leary currently leads the global opportunities strategy group’s investment activities in North America, and contributes to the analysis, portfolio construction, and management of the global opportunities and value opportunities strategies. Before joining Oaktree in 2002, he was a consultant at McKinsey & Company, and prior to that was at private equity firm Orion Partners, where he focused on private company investments.

As managing director and Oaktree’s head of performing credit, Panossian oversees the firm’s liquid and private credit strategies, and is a portfolio manager within its global private debt and global credit strategies. He joined Oaktree in 2007 from Pequot Capital Management, where he worked on their distressed debt strategy.

“I’ve had the opportunity to work and invest alongside Bob and Armen for the better part of two decades,” Karsh said in the statement. “Not only have they distinguished themselves as highly skilled investors, but also as leaders who have recruited, developed, and retained strong teams.”

Molz currently oversees Oaktree’s compliance, internal audit and administration functions, and all legal activities, including fund formation, acquisitions and other special projects. Before joining the company in 2006, Molz was a partner at the Los Angeles-based law firm of Munger, Tolles & Olson LLP, where he focused on tax and structuring aspects of complex business transactions.


Related Stories:

Howard Perlow Named Angeles Investments’ 1st CEO

New Zealand Super Fund CEO Will Step Down at End of Year

Alecta Fires CEO as Fallout Continues From $2 Billion Banking Losses

 

 

Tags: , , , ,

«