This post is part of a series of posts called “Company Notes.” These posts contain quotes and exhibits from earnings calls, conference presentations, analyst days and SEC filings. Full transcripts can be found at Seeking Alpha
Uniquely positioned to take advantage of volatility
“we are uniquely positioned to take advantage of the market volatility across all of our businesses. We’ve seen the public markets correct many times before, and as always we will present the potential for abnormal deal flow with favorable risk adjusted returns.
With one of the largest pools of dry powder capital, we can and will move quickly to respond to market dislocation. These types of investment environments end up becoming some of our best vintages, our job is to look at the markets and the world objectively, not promotionally.”
We’re not hostage to the stock market
“we’re not hostages of the stock market; we’ve a lot of mechanisms for realizing investments. And we are not ever forced sellers, unlike almost all other market operators. Given the long-term and locked up nature of our funds, with no redemptions, we do not sell in opportune times as I have seen people do repeatedly in times of market uncertainty. In fact, our portfolio of companies are in great shape, the shape they’ve been in many, many years, and continue to see strong operating results.”
Credit markets have gone a little overboard, we’ve been using less leverage
“we have been shying away from maximizing leverage in private equity for some time just feeling there is just too much credit available with leveraging the companies too heavily. Because I think, Steve mentioned we look at what real driver of our investing is unlevered returns, and they have to get to the levels. And then we use credit markets to enhance that and magnify it, but they’ve gone overboard.”
We’re not optimistic about Europe, but we’ve priced our purchases with that assumption
“I’d say in the European area, our biggest exposure is in real estate, we’ve a very conservative view towards Europe. I guess you would, it’s another word choice you could tap for that, which is unoptimistic. So, when we buy something there, and we’re buying very large amounts of different types of assets is simply because there is an imbalance now with way more sellers than buyers, which puts pressure on price. So, we can create investments at a very good yield, and then, leverage them, and get very satisfactory returns with no growth in individual markets, simply because of the liquidity that’s out there.
We also when we buy something, we’ll try not to be passive buyers of anything, and we usually have some improvements planned of what can be done. And, even if our market is flat. If an asset has not been maximized, our job as Jon Gray would say it very nicely it’s buy it, fix it, sell it. And our overall economic model is that we’re not optimistic about economic growth in Europe and so we’re consequently not disappointed when that growth is not there and it’s all part of that plan”
Institutional investors are increasing allocations to alternatives, but shrinking number of firms they work with
“not only about half of large institutional investors increasing their exposure to alternatives. They are really shrinking the number of people, number of firms they give money to.”
Markets are over-reacting
“if markets give away to the point that there is catastrophe then what happens is people just freeze, but I don’t think that’s part of this cycle the U.S. economy is doing quite nicely and I think we’ve got like an overreaction going on because of health concerns and foreign policy concerns and all this stuff coming together, that is just scaring people and in a way you can’t blame them, because there is a sense that were sort of out of control and that’s being reflected into markets. But that’s not – I don’t think sustainable.”