“Thoma Bravo Founder Says Private Equity Has Lost Its Way” – Bloomberg, June 4, 2025 

 

“In New York, they say, you're always looking for a job, a boyfriend or an apartment.” If you know this quote, you’ll have seen SATC, the show all about dating in NYC. 

 

Hear me out here, but I think in some ways, investing is like dating, with hits and misses, red flags - due diligence and manager(partner) selection matters. 

 

To veer away from being entirely predictable, I’m not titling this ‘Stocks and the City’, but rather ‘Leverage or Love’. So about 90% cliché. 

 

There have been a lot of headlines about the intriguing private markets business this week on the back of a big private markets conference in Berlin. 

 

Today, let’s introduce private markets - what are they, and what does the headline mean? Allow me some creative liberty here, we'll be assigning each SATC character a different part of the private market space. 

 

Samantha Jones: Venture Capital 

The raciest of them all, venture capital (VC). Think Silicon Valley, tech start ups, AI, and a lot of hits and misses. Just like Samantha moved to the Meatpacking district before it was cool, venture capitalists invest into early stage companies, buying a piece of the company and scaling it to hopefully become the next big thing. Companies like Amazon, Meta, AirBnB all received VC funding. 

 

Charlotte York: Real Estate 

The Park Avenue princess, generally more conservative: real estate. There are many ways to invest into real estate, but typically you’re going to be borrowing a lot of money (leverage) and investing into different types of properties, whether that be residential, offices, warehouses, or commercial real estate. It is often uncorrelated (moves differently) to other types of investments. 

 

Miranda Jones: Private Credit

Only fitting that the lawyer is the one lending the money. Private credit is where a non-bank is lending money to a company. This really became popular after the great financial crisis (GFC) when banks weren’t so readily able to lend money to private companies due to new regulations. 

 

Since then it has really increased in popularity. It is very different from investing into public market bonds, where you are constantly subject to market forces. Private credit generally allows more control over the terms of the loan. 

 

Carrie Bradshaw: Private Equity

The first character many think of when they think about SATC, and the first type of private investing that comes to mind to most. Private equity (PE) really ramped up back in the 1980s with leveraged buyouts (LBO), where a PE firm takes a publicly listed company private to improve the way that company runs. 

 

Since then, private equity has hugely evolved and encompasses so much more than LBOs. Carrie dated a lot of guys, not just Mr Big, who can be likened to our LBO here, but Mr Big is the one everyone remembers, for better or worse! 

 

Hands On, Hands Off 

When you're investing, most of the time, you're either lending money to a company (debt/credit/bonds), or you are buying part of that company (equity/stocks/shares). 

 

With publicly traded companies, you have less control - think of it like taking a train. By contrast, with private markets, it's more like driving your own car. You choose the route, service stops, and destination. 

 

Another big difference between the two is that when investing in private markets, your money is locked up for longer - you can't buy or sell on a daily basis, like you can in public markets. Investors want to be compensated for this, which is called the 'illiquidity premium'. 

 

Leverage or Love? 

The title eludes to one of the key parts of private market investing: Leverage. Leverage just means borrowing money. Remember when Elon Musk took Twitter private? Twitter was a publicly listed company – we could all buy and sell it. Elon had said he would take it private at a $44 billion valuation – meaning he had to find $44 billion to buy Twitter stock from all the people who owned it. 

 

But he didn’t take $44 billion of his own money, he fronted about half of it, and the rest? He borrowed. This is the ‘leverage’ part, and a basic component of any LBO deal. By the way, according to the WSJ, this was one of the worst LBOs ever. 

 

The ‘Love’ part is what private equity can really bring to the companies it invests into: making them better companies. What does that mean? 

 

It might be tough love, changing management or exiting unproductive business lines. 

 

On the flip side, it may be investing into research and development, creating efficiencies or buying another company which would complement the existing business. 

 

The best private markets players balance both: using leverage smartly, and investing with love - building the company's earnings with something real, not just timing for a sale at a higher price. 

 

Has Private Equity lost its way? 

Back to the headline: Orlando Bravo’s point is that private investments should return back to their roots – investing into interesting companies and making them better, rather than focusing too much on what’s happening in the macro-economic news and waiting for ages until they exit their investments. 

 

Think of it like buying a house, and actually making it better before you relist it, rather than holding onto it for ages to wait for the 'perfect' time to sell, or not adding anything of value before relisting at a higher price. 

 

The Take Away 

The takeaway is this: investing, just like dating, requires due diligence, choosing wisely and investing into growth. There is a big divergence between the best and the worst of private markets managers, just like in public markets (and the dating pool)! 

 

What is your opinion? Do you agree with Orlando Bravo? Which firms are playing it right, focusing on making businesses better and are there some which are distracted? 

 

Would love to hear your thoughts – hit reply and share. We read every email, even though we may not always have the capacity to reply. 

 

And Finally… Fun Facts to Share over a Cosmopolitan 

The early stage investment into Amazon by Kleiner Perkins Caufield & Byers (a Venture Capital firm), returned them about 55,000%! Which is a fantastic outcome. However, there have been countless VC investments which lost every cent invested. 

 

Switching over the public markets, there are also a lot of losers, and some big winners. 

 

A phenomenal paper by J.P. Morgan Asset Management shows that over the course of 40 years (1980 – 2020), when looking at the Russell 3000 (the 3000 biggest companies in the US), about 2 out of 3 performed worse than the index itself (the Russell 3000). About 42% had negative returns, and only 10% of them knocked it out of the park, outperforming the index by 500% or more. 

 

Cheers, until next week! 

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Glossary 

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