Private equity hit by Earth, Wind and Fire in Berlin

One scoop to start: City grandee Mervyn Davies received $40mn last year as LetterOne’s non-executive chair, enjoying a sharp increase in pay as the firm’s sanction-hit Russian founders were forced to relinquish control of the investment firm. 

In today’s newsletter:

Private equity gets nostalgic

The private equity industry is in a strange place.

Top dealmakers and fundraisers descended on Berlin this week for the annual SuperReturn conference. But the most popular speaker, drawing a snaking line even just for entry to the overflow room, was reality star-turned-private equity executive Kim Kardashian.

“Authenticity is key,” Kardashian told Carlyle Group co-founder David Rubenstein. 

While she was giving Rubenstein advice on how to attract Instagram followers, it’s also wise counsel for the private equity executives navigating the labyrinthine rooms of Berlin’s InterContinental alongside tricky markets.

After a decade of breakneck expansion, private equity is having to come to terms with the fact that everything isn’t going their way. 

Higher financing costs, a dealmaking slump, US-China tensions and a tough fundraising market are all weighing on sentiment.

Harvey Schwartz, who helped guide Goldman Sachs through the global financial crisis, described the current environment as “one of the most complex in economic history”.

There was an acknowledgment that the heady days of zero interest rates and frantic dealmaking have fallen away.

“If you were to look at how we’ve evolved over the last year, I would say we’re more cautious on private equity today as an asset class,” said Elliott Management senior executive David Kerko.

Silver Lake’s Greg Mondre put it more bluntly: “Transactions have fallen off a cliff,” he told attendees.

More concerning is the difficulty firms are having getting investors to part with their cash.

Managers held back-to-back meetings with the institutional groups that commit to their funds, pitching that now is the time to invest because falling valuations are presenting attractive opportunities.

Despite their efforts, many won’t be successful, industry executives predicted. This led to some including Goldman’s Julian Salisbury predicting a shake-out in the market, with bigger players getting bigger and the smaller firms falling away. “It’s about size and scale,” the head of one large European credit firm said.

To underscore the point, asset management giant BlackRock struck a deal to buy private credit manager Kreos Capital as the conference was in full swing.

Discussions around the implications of new advancements in artificial intelligence were a dominant theme in panel discussions. Executives said they were studying what developments in AI mean for their portfolio companies and their own operations.

General Atlantic’s Gabriel Caillaux said the firm had run past and potential deals via an internal “bot” to predict how they might perform. One attendee wondered if the technology would have recommended backing Greensill Capital, the now defunct “fintech” company that General Atlantic invested in.

In a possible sign of the market, two of the most prominent parties were thrown by in-demand placement agents who help private equity firms raise money.

Attendees danced to live performances by Earth, Wind & Fire, and The Jackson 5. Both being throwbacks to simpler times.

Hedge fund manager Crispin Odey faces a reckoning

Everyone in the City of London has heard of Crispin Odey.

The London-based hedge fund manager developed a reputation for oscillating between enormous returns and devastating losses. He carried on the kind of old-school pomp and long boozy lunches from a bygone era of finance that many had left behind.

Despite his eccentricities and insatiable appetite for risk, however, the consensus in London’s elite financial political circles was that he was harmless. “A large puppy in a pinstripe suit,” the FT once remarked.

Behind closed doors, however, according to this deeply reported investigation by the FT’s Madison Marriage and Antonia Cundy and Tortoise Media’s Paul Caruana Galizia, he was a predator.

Thirteen women who have worked for Odey Asset Management or had social or professional dealings with its founder told the FT that Odey abused or harassed them between 1998 and 2021; eight alleged he sexually assaulted them.

A law firm representing him said he “strenuously disputed” the allegations and claimed the FT had a “preordained agenda”.

To many ingrained in London’s financial sector, the allegations may not come as a surprise.

The 64-year-old defended himself against a sexual assault claim made by a female banker in a British court and won, and has also been the subject of allegations reported by Bloomberg, The Sunday Times and a Tortoise Media podcast.

Nevertheless, Odey’s friends in high places made him a formidable target. The so-called big man, as he was known to staff, enraptured Britain’s top power brokers with his deep pockets.

He used his wealth and prestige to create strong ties in the Conservative party, donating more than £350,000 over the years, according to public records, and befriending politicians such as former prime minister Boris Johnson.

Odey surrounded himself with other members of high society: his predominantly male workforce included a disproportionate number of Old Etonians and Old Harrovians, and a hodgepodge of dukes, barons, viscounts, marquises and earls.

Long boozy lunches were the norm at his Mayfair offices, and “Odey Girls” were warned to take the stairs over taking the lift alone with him, according to corroborated interviews with more than 40 former employees of Odey Asset Management.

Odey stepped down as co-chief executive of his firm in November 2020, as he awaited a court hearing after being charged with alleged indecent assault that July.

The presiding Judge Nicholas Rimmer found Odey not guilty, telling the financier he could leave the courtroom with his “good character intact” and congratulated him on reaching his sixties “without a stain on your character”.

There has been some change in reception to Odey since then. The UK’s top financial regulator is investigating Odey Asset Management, and Morgan Stanley is moving to sever its relationship with the firm since the FT’s investigation.

Job moves

• Drew Gillanders, who retired from Citadel a year ago, is coming back to lead its international equities unit in Europe, per Bloomberg. He succeeds Sean Salji, who will become a senior adviser.

• GameStop has fired its chief executive Matt Furlong and promoted Chewy co-founder Ryan Cohen, who joined GameStop’s board in 2021 after acquiring a near 13 per cent stake in the gaming group, to executive chair.

Smart reads

Vanity affair The only way to explain Telegraph Media Group’s £600mn price tag now that it has been forced into receivership is the British group’s ego, Reuters’ Breakingviews argues.

Inside Billionaires’ Row Central Park South has long been a playground for oil tycoons and hedge fund billionaires. But its expensive towers have taken a hit from New York’s shifting real estate market, The Wall Street Journal reports.

Florida in flux Ron DeSantis believes transforming Florida into a booming financial hub could help stake his presidential future. But rising economic inequality and high housing costs could complicate his bid for power, Bloomberg reports.

News round-up

Ivan Glasenberg nears deal to buy elite cycling brand Pinarello (FT) 

Debt-laden French supermarket Casino ends deal talks with Teract (FT) 

Rebel investors reject GAM takeover and call for board shake-up (FT)

CAB Payments announces plans to pursue London listing (FT)

CRH shareholders approve listing switch from London to New York (FT)

Mohamed Mansour: the tycoon behind the Tories’ biggest donation in decades (FT)

Wall Street has a new favourite phrase and it’s utterly nauseating (Alphaville) 

Kika/Leiner files for bankruptcy days after René Benko sold it (FT)