Leyla Kunimoto

I can't believe it's come to this, but here's a visual representation of this ridiculous structure. Ladies and gentlemen, a tertiaries fund:

- bottom: actual portfolio companies, purchased by PE Funds I and II (with respective LPs)

- a secondaries fund comes along, buys LP interest in Funds I and II from some LPs (gives them money, in exchange gets their stake in the fund). This secondaries fund raises money from other LPs

- but now, we have a tertiaries fund (!!) This fund will buy secondary interest in secondaries funds (by raising money from other LPs).

And no, this is not a second sale of those original fund stakes. This is a sale of stakes in the secondary fund.

Does anyone even remember how many layers back the actual value is created???

P.S. not to be confused with CV vehicles (although CV vehicles are a subset of a secondaries fund bucket) - stay tuned for that visual..

Want a deeper dive on secondaries? Here you go:
https://lnkd.in/g44zixBK

LP asking why IRR says 20%, when there haven’t been any distributions

“So the borrower had negative EBITDA, pledged the same collateral to three other lenders, and you gave them a PIK toggle loan?”

Regional banks discovering why private credit pays double-digit yield

Don't ask me how I did this, I have no clue. The newsletter was born out of sheer frustration:

I had never seen a playing field where information imbalance was as extreme as it is in private markets.

It was infuriating watching some GPs with marketing skills raise vast sums into obviously doomed deals, while most retail LPs struggled to tell good operators from the not-so-good ones.

The problem is not isolated to the lower middle market, btw. On the top end you don't have access to the manager at all, and disclosure is minimal.

If I learned anything, it's this: better branding ≠ better underwriting.

✍ So I started writing.

With no marketing budget, no followers, and no experience writing newsletters. If I knew how hard it would be I might not have begun 🤣

Yet the response has been incredible from day one, and I'm very grateful.

📍 I have never promoted GPs, and I have no plans to start. There are too few independent voices in this ecosystem. I intend to remain one of them.

Here's the value proposition: I can help you become a better investor by showing you how the sausage is made, so you can vet GPs and offerings with confidence.
(also, you'll get a ton of memes)
You can subscribe here: https://lnkd.in/gsxEASyW

👉 If there is something you would like me to dig into, comment, DM, or email. I am here to help.

P.S. I would be remiss not to mention Kris Rymer, CPA who was there at the start. He has since moved on to bigger and better things (with my full support). I'm grateful for his friendship.

Risk on, people. The financially prudent amongst us will be eaten alive by inflation —

It doesn’t matter that it’s an everything bubble.

What matters is that investors will continually be left with a dismal choice:

- take on risk in search of yield
- or sit on a melting ice cube of cash equivalents

Deeeeep in my heart, I’m a value investor. But as I get older, I realize the wisdom in the old adage:

“Don’t bet against the Fed”

A great read from Financial Times on insurance ratings of private credit loans. TL;DR:


- small credit rating agencies are now providing the vast majority of private ratings on securities -- there are concerns that these ratings are inflated

- meanwhile, US life insurers are the biggest buyers of such debt

What does holding assets with inflated ratings do to insurance companies?

It lowers the amount of buffer they have to keep on the balance sheet.

This doesn't matter during the go-go times, but:

"The lack of transparency and liquidity of private loans makes them tricky to value accurately, increasing the risk of “fire sales which can amplify price movements during periods of economic stress", according to BIS"

(Link in comments)

The current state of affairs: