The recent report in Unquote about Goldman’s Petershill III fund is further evidence that the GP stakes business is in high gear. Combined with just two other leading investors in the GP stakes market, Blackstone’s Strategic Capital Holdings funds and Dyal Capital Partners’ funds, a total of over $11 billion has recently closed for this strategy. That’s a lot of capital and competition to invest in the world’s leading private managers.
According to the Wall Street Journal, Petershill III is focused on GPs managing between $5 billion and $20 billion of assets. That’s a relatively small universe of general partners – certainly less than 100 – out of over 7,000 management companies…and counting. That’s capital focused on less than 1.5% of all private equity firms. The key question, of course, is whether Petershill can achieve its promised 2x return on invested capital with a 20% IRR. It’s unclear from the story whether these returns are gross or net.
Time will tell.