Julliard K. Del Rosario, CFA

News in the World of Finance! Sikich has secured a significant $250 million minority investment from Bain Capital. This strategic move not only reflects Sikich's impressive growth trajectory but also highlights the confidence of a renowned investor like Bain Capital in their vision and capabilities. #Finance #Investment #Sikich #BainCapital #BusinessGrowth https://lnkd.in/ear2pdwC

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Check out this week's post, where we examine the recent for-profit spin-off of the ACT, the unclear benefactors of college endowments, and preview our guest post from the incredible Kaitlin Dumont for next week! #Education #College

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Big 12 members are in the works of a groundbreaking move: accepting an up to $1 billion investment from CVC Capital Partners in exchange for a 15% to 20% stake in the league. This potential deal could really shake things up by giving the conference a solid financial boost and a more competitive edge. While details are still unfolding, this is a bold step for college sports to navigate new financial landscapes post-revenue sharing rulings. #Big12 #CVCPartners #SportsInvestments

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GINORMOUS Complex-Finance Self-Cannibalizes, Again! 1. Complex finance obscures self-referencing credit risk. 2. Complex-finance complex complains that one article misses the finer obscure points. Well, that's complex finance for you! As fellow independent researcher Ann Rutledge observes: "Finance pays itself for paying itself." See Financial Times "Blackstone snaps up ‘circular’ private equity credit risk" by Ortenca Aliaj, Antoine Gara, and Eric Platt. "Because of its sheer size, Blackstone has assumed risk on credit lines attached to its own buyout funds, though the firm said they only constitute 'a single-digit percentage' of the portfolios on which it has exposure. "Such transactions magnify the private equity behemoth’s exposure if an investor were unable or unwilling to fund their commitment. “'The unusual thing about Blackstone is that it is a bit circular,' said one large SRT investor. “'They are providing protection on themselves.'” "[A] bit circular" is unusual? Maybe, but a LOT circular is very common. Please see my 25-year-and-counting, best-in-world work on the flip-clause-swap-contract. Under the contract, a bank assumes full exposure to its own default. https://lnkd.in/dbnaUgNp The flip-clause-swap-contract was integral to the collapse of Lehman Brothers and the near collapse of the Greek economy, is ubiquitous in EU and UK RMBS, securitizations, and structured debt, and will be ubiquitous in U.S. CLOs if private equity gets its way. IF private equity gets its way? WHEN private equity gets its way! P.S. Ortenca Aliaj, Albert Yoon, and I worked aside each other at Debtwire in 2016. Time to PUBLICLY review the flip-clause-swap-contract. Allison Pyburn, John Wilen, and Corinne Smith can moderate, using these three of my Debtwire articles. "ANALYSIS: US margin rule for swaps obliges securitizations issuers to overhaul structures, add resources and re-think capital structures" (5 Nov 2015) https://lnkd.in/eVuntQM5 "ANALYSIS: CFTC swap margin rule denies relief for securitization issuers; shines light on 'flip clauses'" (18 Dec 2015) https://lnkd.in/eTvcZxgV "Margin posting: swaps increase ABS issuance costs by 1%, 3%, 7% . . . of deal size -- ANALYSIS (16 May 2016) https://lnkd.in/eRCYq5u2 P.P.S. Put the U.S. Commodity Futures Trading Commission on the To-Sue-List! (Yesterday, I posted on suing the SEC to rescind a no-action letter that exempts NRSRO credit rating companies Morningstar DBRS, Fitch Ratings, Moody's Ratings, and S&P Global Ratings from expert liability in assigning credit ratings to certain ABS and structured debt, including where an issuer is party a flip-clause-swap-contract.) CFTC capital rule treatment of the flip-clause-swap-contract is "capricious, arbitrary, and an abuse of discretion". Ditto CFTC collateral and capital comparability determinations for the EU, UK, Japan, and Mexico.

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Good article out today from the WSJ on some challenges facing Pension Funds stuck in Zombie PE Funds (see link below). It reminded me of a presentation from GS I recently saw where the allocation breakdown for Pension Fund assets was depicted. The move toward Alternatives has been aggressive over the last many years, now close to matching allocations to public Equities. However, as the article points out, complexity + illiquidity don't always translate into superior outcomes. For Pension Funds, it's been public equities that have served as a great source of liquidity recently, as they've been big sellers every month end this year and sanitizing gains into FI in the process. As retail investors become the latest targets for PE funds, they should take note and ask hard questions. WSJ: Pensions Piled Into Private Equity. Now They Can’t Get Out. "Now the honeymoon is over. The payouts have dried up, creating an expensive problem for investment managers overseeing the savings of workers retired from big corporations and state and city governments. To keep benefit checks coming on time, those managers are unloading investments on the cheap or turning to borrowing—costly measures that eat into returns. California’s worker pension, the nation’s largest, will be paying more money into its private-equity portfolio than it receives from those investments for eight years in a row. The engine maker Cummins took a 4.4% loss in its U.K. pension last year, in large part because it sold private assets at a discount. It is the latest cash crunch to befall retirement funds that have piled into hard-to-sell investments in search of high returns, and spotlights the risks as Wall Street is trying to sell those investments to wealthy households." https://lnkd.in/ePr8ZH-f #privateequity #macro #investing #trading #equities

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In the season finale of Brex's Controllers Classified podcast, BCV partner Sarah Hinkfuss spoke with Erik Zhou to discuss the VC investment landscape and how BCV approaches due diligence for growth-stage companies. For founders, there are three things that are important to share with investors: 1. Your unit economics, or how you think about your business drivers. It’s by far the most important thing today and those inputs (e.g. customer cohort data, gross margin, sales and marketing costs) give you a complete picture of the business. 2. Your business model, or how you think about your future. It doesn’t have to be a huge, complicated spreadsheet. Rather, it’s an important instrument to show people how you think about the business. What is your view of the future and what do you believe are the most important drivers of the business? 3. Your memo, or your narrative. A popular format today is to tell your story in a memo, not a deck, and it’s great because the writing process forces more complete thoughts to give investors a full view of your business and vision.

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LLMs are incredibly powerful research partners: they can perform laborious research tasks and analytical techniques...and free up humans to focus their time on strategic decision-making. Here's a great case study 👇 #intelligence #risk #commodities #AI

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In 2005, amidst the NHL player lockout, Boston private equity banker Stephen Pagliuca proposed an audacious idea: Bain & Co., his firm, would purchase the entire NHL for $4 billion. Although owners declined, this marked a pivotal moment when private equity (PE) recognized the potential of sports teams. Today, the NHL's average club value has surged to $1.31 billion, up 948% from Pagliuca's offer, now totaling $41.9 billion (as per Sportico). The NHL, like other major leagues, now allows PE firms to own up to 20% of a team, with restrictions to maintain league integrity. This growth attracts PE firms seeking high returns beyond stock markets. As the landscape evolves, the NHL's openness to institutional investors—whether from private equity, pension funds, or other entities—reflects a broader strategy to ensure financial stability and growth in an increasingly competitive sports market. Source: https://bit.ly/3LbimLm #PrivateEquity #NHL #SportsInvestments

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This thought-provoking article written by my colleagues explores the growing presence of private equity in the commercial space sector and explores the unique challenges faced by new entrants. It introduces the "Space Integration Ladder," a strategic framework designed to assist industries in assessing their readiness for space ventures and establishing a solid position in this burgeoning market. A vital resource for private equity firms navigating the complexities of the space economy, this article offers a strategic compass for those eager to seize opportunities in the final frontier of commercial enterprise. Additionally, investigate how PE is reshaping capital markets and industries on Earth. Authored by @BrianMiske, @GavinGeminder, and @JoshKirton

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𝗬𝗼𝘂𝗿 𝟮-𝗺𝗶𝗻 𝗽𝗿𝗲𝗽 𝗳𝗼𝗿 𝘁𝗵𝗲 𝘄𝗲𝗲𝗸 𝗮𝗵𝗲𝗮𝗱 𝗶𝗻 𝗴𝗹𝗼𝗯𝗮𝗹 𝗺𝗮𝗿𝗸𝗲𝘁𝘀👇 📆 𝙎𝙪𝙣𝙙𝙖𝙮 🇺🇸 Fed Chair Powell due to deliver a commencement speech at the Georgetown Law Commencement ceremony. Any commentary on rate cuts will br key. 📆 𝙈𝙤𝙣𝙙𝙖𝙮 🇨🇳People Bank of China is set to announce its Loan Prime Rate which serves as the country’s pricing reference for bank lending. No change expected. 📆 𝙏𝙪𝙚𝙨𝙙𝙖𝙮 🇪🇺President Lagarde due to speak at the Frankfurt School of Finance. Any commentary around timing of rate cuts will be critical. 🇬🇧Boe Governor Bailey scheduled to speak at the London School of Economics. Similarly, any indication about the timing of the first cut will be important 📆 𝙒𝙚𝙙𝙣𝙚𝙨𝙙𝙖𝙮 🇬🇧CPI forecasted to slow drastically to 3.7% core and 2.1% headline from last month’s 4.2% and 3.2% respectively. Any reading at or below expectations will be consistent with the recent dovish BoE guidance. 🇺🇸FOMC meeting minutes are set to reveal whether policymakers are supporting Powell’s dovish stance we saw on the meeting. Any deviation from the guidance can bring volatility in markets. 📆 𝙏𝙝𝙪𝙧𝙨𝙙𝙖𝙮 🇺🇸🇬🇧🇪🇺Manufacturing/Services/Composite PMIs will indicate how economic activity in the Eurozone, UK and US is keeping up with higher rates. 🇺🇸Initial Jobless Claims continue to be an important reading for the US labour market. Consensus at 220K. 📆 𝙁𝙧𝙞𝙙𝙖𝙮 🇬🇧Retail Sales will provide further evidence on economic activity in the UK from a consumer perspective. Projected to contract from last month. In addition to the above, several FOMC members are scheduled to speak which can bring more volatility. A relatively busy week with UK inflation and Fed meeting taking the spotlight. Have a great trading week! 👊 #markets #weekahead #data #inflation #interestrates #centralbanks #economy #investing #finance

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📈 Retail M&A Spotlight: KKR to Acquire Varsity Brands from Bain Capital for $4.75 Billion📈 In recent years, the sports sector has become a favored target for private equity investments. This trend encompasses various aspects such as team ownership (e.g. Arctos Sports Partners investing into the Sacramento Kings and the Golden State Warriors) and brand and licensing ventures in sporting merchandise and gaming (e.g. Fanatics). Recently, Varsity Brands, a leading provider of sports uniforms for students, announced its acquisition by KKR from Bain Capital for $4.75 billion. Varsity Brands comprises two main businesses: ➡️BSN Sports: Distributes customizable team sports equipment and apparel through partnership brands, including Nike and Under Armour. ➡️Varsity Spirit: Sells cheerleader uniforms and apparel, and hosts educational camps, clinics, and competitions. With an EBITDA of approximately US$400 million, the transaction implies a 12x EBITDA multiple. Notably, this acquisition follows Bain Capital's previous ownership, indicating potential for further growth under KKR’s management to achieve their return targets. 🔗For more: https://lnkd.in/g79vbiGX #MergersAndAcquisitions #VarsityBrands #KKR #BainCapital #SportsApparel #Investment #BusinessNews

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$33M to Calhoun as a reward for failure. Boeing’s headline safety issues and poor performance. A dollar invested in the S&P 500 five years ago is worth $1.85. The same investment in Boeing is worth $0.52. Here's how I voted https://lnkd.in/gM4akTe9 Take control of your proxies through https://www.iconikapp.com/ Never miss a vote again and its free. You can set it to automatically vote against outrageous CEO pay and board failure. $BA #proxy #proxyvote #CEOpay #DEI #ESG

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There is a lot of talk about the PE industry not delivering the exits they promised. PitchBook succinctly put it with the title “Behind the J-curve” in its recent in-depth analysis of distribution activity in private market funds. Another side of that story, particularly relevant for secondary buyers like us, is that many private market funds hold their assets at seemingly inflated valuations. TVPI numbers look great for most funds, but they can’t monetize their holdings anywhere near their current NAV, indicating their estimate of “fair market value” is way too optimistic. There is always a market, the price may just not be where you wish it. To a large degree, the reluctance to exit companies results from having them marked too high. Assets were aggressively written up to look good in the short-term, impressing LPs with “paper gains” to raise the next, much bigger fund. #secondaries #privatemarkets

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This past week contained an initial inflation panic, but cooler heads should prevail. In this week’s Siegel Commentary, Professor Siegel peels back the layers of the latest CPI data to uncover a strong economic core that could defy the pessimistic inflation narratives. Read and subscribe today. #Inflation #CPI #Fed https://bit.ly/3VnD9OE

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It is no secret that many VCs are facing pressure from their LPs to return capital as LPs have become overallocated to private assets in recent years. The problem is exits are few and far between in the current market with already-low counts of M&A transactions dropping by about 6.5 percent, IPOs dropping by nearly 40 percent and SPAC deals dropping by one-third from Q4 2023 to Q1 2024, according to data from CB Insights. That's why Dan Engel told me he "decided to get creative." His firm Santa Barbara Venture Partners closed out Q1 2024 with four exits from its vintage 2020 debut fund, three of which happened in the span of just four weeks. Engel leveraged the secondary market, a long-stigmatized strategy, to achieve gross IRRs of 33 percent and 44 percent on partial sales of his firm's stakes in two companies. He told me that the strategy has been supported by other GPs in the industry, albeit quietly. "I really don't get why other VCs aren't doing the same. It's a strategy that some are quietly agreeing makes a lot of sense, but they aren't going to get loud about it because it will make them look bad." Read more on Venture Capital Journal. #venturecapital #secondaries

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New by me for American Institute for Economic Research - AIER. Highlights: 1) The fed funds rate is 2-3 times as large as estimates of the natural interest rate 2) Divisia aggregates growing slowly, M2 growing very slowly 3) No Fed rate cut yet We'll see whether this month's PCEPI shows the same trends as the CPI. If so, it might be time to loosen policy. But we shouldn't overreact to one good inflation report. We were here during the second half of 2023, then inflation picked up in 2024:Q1. Still in "wait and see" territory.

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Q&A on Duke Capital (DUKE): Generating investor returns by uniquely meeting customer needs. Hardman & Co analyst Mark Thomas joins DirectorsTalk Interviews and unpacks the unique hybrid capital solutions Duke Capital offers to SMEs in the UK, Europe, and North America. He highlights how Duke’s innovative approach blends equity and debt to maximise returns while minimising risk. Mark outlines Duke’s four primary return pillars: high-interest senior secured loans, revenue-growing participating preference shares, early exit fees, and equity stakes, explaining how these elements together facilitate equity-like returns with debt-level risks. Additionally, we explore Duke’s growth strategies and the robust measures in place to protect against potential downsides, ensuring sustainable investor returns and fulfilling customer needs. Listen to the interview: https://lnkd.in/dvBGMh3j #research #interview #financials #financialservices #investmentresearch #investing #capitalmarkets

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In the current fundraising environment, VCs and LPs are adjusting their scrutiny of potential investments. 🔎 Sapphire Partners Partner Elizabeth "Beezer" Clarkson shared her perspective on how with The Wall Street Journal’s Brian Gormley in today’s WSJ Pro VC newsletter, highlighting that LPs have refined their focus to dive deeper into portfolio performance beyond just top-line numbers. Read more insights from Beezer below and the full newsletter here: https://lnkd.in/eTMRWFhy  👇 #VentureCapital #InvestmentStrategies

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