Even The Wall Street Journal Forgets About LPs
Last week, The Wall Street Journal reported that private equity firms paid banks $1.3 billion to underwrite initial public offerings for portfolio companies thus far this year.
The Journal also reported that private firms paid $3.6 billion to banks to advise them on the sale of companies.
I am confident that the figures are accurate. However, The Journal should acknowledge that private equity didn’t pay the banks anything. It’s the limited partners who paid nearly $5 billion in fees for investment banking services. While private equity executives arranged for the IPOs and retained the banks to advise on the sale of portfolio companies, it’s the LPs’ capital that absorbed every cent of these fees.
We have turned PE executives into titans because they arrange multi-billion dollar transactions and collect and dole out large fees. However, they are nothing without investors. That point gets lost if we’re not repeatedly reminded that it’s endowments and pensions that make the largesse possible in the first place.