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The blowout private-equity confab, SuperReturn, is underway in Berlin, Germany, and Business Insider was on the ground to document the opening day.
Just before kickoff, attendees were hit with news that would hang over the day’s events: reports that coronavirus was spreading, with more than 80,000 people infected, and a Bain & Co report that US private equity returns essentially matched US stocks the past decade.
Kewsong Lee, co-CEO of The Carlyle Group, said that his firm was monitoring portfolio companies and doing everything it can to help its employees through the coronavirus scare, but expressed optimism as well.
There was also industry chatter about what might happen as we reach a late economic cycle, and how private-equity firms are positioning themselves for a downturn.
Below we set out to chronicle the big takeaways from the day’s events, with quotable sound-bites from private equity’s glitterati.
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Just before the start of SuperReturn, the annual private-equity confab that’s drawing thousands of investors, lawyers and consultants around the world, attendees were hit with news that would hang over the day’s events.
The World Health Organization announced that coronavirus cases outside China were accelerating, infecting about 80,000 people in nearly 40 countries, with at least 2,600 people dead. That caused global stocks to tumble.
At the same time, an industry report from consulting firm Bain & Co offered a worrisome outlook on the state of private-equity investing.
Its findings showed that U.S. buyout funds essentially matched U.S. stocks over the past 10 years, and that PE shops were having a harder time getting good returns, given the amount of dry powder — more than $1.5 trillion — which has driven up prices for deals.
"If you draw a trend line between the 10-year return in 1999 and the 10-year return today, it would show a decline of 6 percentage points over that period," the authors of the report wrote.
These topics kept cropping up throughout the first day of the SuperReturn conference here in Berlin, where CEOs and other executives of some of the largest private-equity shops have flocked to network, do deals, and market their businesses.
Taking the stage Wednesday, Kewsong Lee, co-CEO of The Carlyle Group, told Bloomberg anchor Matt Miller that he was concerned about the coronavirus, especially as it affected Carlyle employees, but that he thought the global economy would power through the upheaval.
"My guess is the impact will be greater than people think because this is such an unknown and uncertain situation that’s still evolving," said Lee. "People are just starting to appreciate the magnitude."
Carlyle is monitoring its portfolio companies carefully, he said, and with travel down, logistics and supply chains have been disrupted, he said.
"You can’t have 40, 50 percent of the world’s second-largest economy be sequestered in the way it has been and not have an impact globally. You can’t have an economy that in some shape or form touches 55 percent of manufacturing output globally, and not have an impact on the world."
But he also expressed some optimism.
"Yes, the short-term impact is quite real, but the central banks are being accommodative," he said in an attempt to quell fears of its toll on the economy, noting that we should "continue to see low, steady growth over the long-term."
As for the Bain report, Lee said private-equity has outperformed the public markets historically, and that the amount of private deal opportunities has expanded along with the amount of capital ready to deploy, so it didn’t necessarily mean doom and gloom for PE investors.
"The real question isn’t, ‘Can we put it to work?" he said. " I can put a lot of money to work tomorrow. The issue is what are the right situations to put our capital into? Because driving value and creating returns when we are paying such high prices are exceptionally difficult."
Those comments were just a few of an action-packed first day at SuperReturn, chock-full of speaking engagements and quotable sound-bites from private-equity’s glitterati.
The event was held mostly in a large dark room with five big screens behind the main stage, featuring video of panel participants so the whole room could see.
Walking throughout the conference, held in the spacious ground-floor of the InterContinental Hotel, one could pick up on some of the biggest topics that were top of mind for attendees.
Of course, many held private meetings in executives’ hotel suites a quick elevator ride away, ready to sell their funds to prospective investors, or talk about a proprietary deal.
But there was also industry chatter, including worries about what might happen as we reach a late economic cycle, and how private-equity firms are positioning themselves for a downturn.
Jeff Aronson, co-founder of Centerbridge Partners, expressed as much on stage when he spoke to how his private equity firm of more than $25 billion in assets under management, was increasingly structuring deals with layers of credit and equity to protect the firm in the event their investment cratered in a recession.
These so-called "structured equity" deals have expanded at his firm, he said.
Historically these deals consisted of about 37% of Centerbridge’s investments, he said, but last year they made up about half of the capital Centerbridge deployed.
"Because we don’t know what will happen, we would rather trade some upside for some downside protection," he said.
Aronson likened the activity to buying insurance on your home when there hasn’t been a fire for years. Some might decide that they’ve wasted money on premiums and stop paying insurance.
"We don’t think that way," he said. "Even though we may have given up some upside, that downside protection, which we have not had to avail ourselves to, we think is really valuable."
One side-effect of the economic cycle is that Centerbridge is not doing any distressed-for-control investing, given that, in Aronson’s words: "if you’re a troubled company in today’s U.S. economy, there is probably something deeply wrong."
To make sure PE shops get their investments right, executives should be laser-focused on finding healthy streams of positive free cash flow in companies they invest in, said Aronson and other speakers.
"Every time investors get disconnected from cash flow, they lose money," said Michael Arougheti, CEO of Ares Management, in an interview with John O’Sullivan, a columnist with The Economist.
"Go back to the simple understanding that the way we pay back a loan is through cash flow and the way we create sustainable value … Nobody gets hurt and we all do well."
For the most part, though, many PE execs seemed little-fazed by how it’s getting harder and harder for private equity to achieve high returns.
Regarding the Bain report, Leon Black, CEO of Apollo Global Management, said that when he saw the news that public equity performed better than private equity, "my feeling was, ‘great.’"
"Sometimes the Celtics win. Sometimes the Lakers win," he jokingly told his interviewer, Hartley Rogers, chair of Hamilton Lane.
"Even the Knicks win some 50 years ago. Which is a sad story for me as a New Yorker, but a good memory."
Black pointed to all the take-private deals PE shops do — Apollo alone did 80 over the past three decades, he said — as well as IPO exits.
"Having a robust public market is in everybody’s interest," he said.
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After closing its factories amid the coronavirus outbreak, iPhone maker Foxconn is starting to gradually re-open its facilities.
In an effort to attract new workers Foxconn is offering bonuses of 7,000 yuan ($995) following the shutdown, the South China Morning Post reports.
Returning Foxconn workers have also been offered bonuses of 3,000 yuan ($427) to return to work, Abacus reported last week.
Foxconn said in a statement that it’s still taking the utmost care to protect its workers against the virus outbreak.
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The world’s biggest iPhone maker is offering workers bonuses of more than twice their monthly salary to entice them to come work in the company’s gradually re-opening factories.
iPhone manufacturer Foxconn and was forced to shut down its China factories amid the coronavirus outbreak. At one point the company even diverted manufacturing to start producing face masks and medical clothing.
On Thursday, however, Foxconn announced its factories are slowly resuming work, and the company is trying some bold ploys to try and beef up its workforce once more.
New hires at Foxconn’s massive Zhengzhou factory are being offered 7,000 yuan ($995) to return to work, according to local reports per the South China Morning Post.
One local news report said that the bonus is staggered, with workers receiving 3,000 yuan after working 60 days and 4,000 after 90 days. The SCMP notes this represents a huge incentive for factory workers at the Zhengzhou site, as interviews with workers last year found that the average monthly salary was between 2,000 and 3,000 yuan.
Employing up to 350,000 people, Zhengzhou is Foxconn’s the world’s biggest iPhone-making facility and is known colloquially as "iPhone City."
Abacus reported last week that current Foxconn workers were also being offered bonuses of 3,000 yuan ($427) to return to work.
In a statement to the SCMP, Foxconn insisted it is still taking necessary precautions against the virus outbreak. "With the current public health challenges linked to the coronavirus, we continue to place a high priority on the welfare of all our employees and we are applying all recommended health and hygiene practices, in accordance with the local laws and regulations, as part of our effort to ensure their health and safety."
It added that it was taking a "cautious approach" to production schedules at its China facilities. Foxconn was not immediately available for comment when contacted by Business Insider.
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Bernie Sanders heads into Tuesday night’s debate as the current frontrunner in hte Democratic primary, his rivals are stepping up their attacks against the Vermont senator. "We’ve trained our eyes on him," one Michael Bloomberg campaign aide told POLITICO.
On Monday, his opponents released a barrage of criticism in the form of tweets, attack ads, and statements after 60 Minutes showed old footage of Sanders appearing to praise Fidel Castro.
But Sanders wasn’t the only target: a pro-Sanders group released an old video of Bloomberg presenting an award to Harvey Weinstein.
The attacks signify that the 2020 Democratic primary has entered a newer, nastier phase after over a year of candidates playing it (relatively) civil.
Visit Business Insider’s homepage for more stories.
Attack ads. Tweets linking a U.S. Senator with history’s most infamous despots. Video of a presidential candidate with Harvey Weinstein. Leaked closed-door audio.
The knives are finally coming out in the Democratic primary ahead of Tuesday night’s debate in South Carolina, with most of the jabs aimed squarely at Bernie Sanders, who is currently the man to beat after victories in New Hampshire and Nevada.
Monday’s barrage of belligerent statements, ads, oppo dumps, and Twitter pile-ons signaled a newer, nastier chapter of the 2020 primary and likely served as a preview of Tuesday’s debate.
The attacks on Sanders stepped up after 60 Minutes aired an interview that replayed footage from the 1980s where Sanders appeared to praise the late Cuban dictator Fidel Castro because, "he educated their kids, gave them health care, totally transformed the society, you know?"
Anderson Cooper pressed Sanders on those past comments. "We’re very opposed to the authoritarian nature of Cuba but you know, it’s unfair to simply say everything is bad," Sanders replied. "You know? When Fidel Castro came into office, you know what he did? He had a massive literacy program. Is that a bad thing? Even though Fidel Castro did it?"
Sander’s opponents immediately pounced.
His comments on Castro were "part of a larger pattern throughout his life to embrace autocratic leaders and governments across the globe," a spokesman for former vice president Joe Biden, Cristobal Alex, said in a statement. The Biden campaign also seized upon a report in The Atlantic that Sanders had considered primarying Barack Obama in 2012, citing the article in an attack ad that ran on digital platforms in South Carolina, POLITICO reported.
"After four years of looking on in horror as Trump cozied up to dictators, we need a president who will be extremely clear in standing against regimes that violate human rights abroad. We can’t risk nominating someone who doesn’t recognize this," former South Bend mayor Pete Buttigieg tweeted, along with the clip of Sanders’ 60 Minutes segment.
Nobody went farther than Michael Bloomberg, whose campaign tweeted out a much-criticized thread that imagined satirical conversations between Sanders and brutal dictators like North Korea’s Kim Jong-Un and Syria’s Bashar al-Assad.
"’Vladimir Putin is willing to poison anyone who disagrees with him, but have you seen how that guy looks without a shirt!! Mmm delish!’ — #BernieOnDespots", the Team Bloomberg account wrote. The tweet was singled out by critics as homophobic, and the Bloomberg campaign has since deleted the entire thread.
The former New York mayor wasn’t safe, either. On Monday, a pro-Sanders group People for Bernie tweeted an old video of Bloomberg presenting an award to Harvey Weinstein, who was just found guilty on charges of third-degree rape and first-degree criminal sexual act. Bloomberg had awarded the producer and his brother, Bob Weinstein, with the Made in NY award in 2013, while he was still mayor of New York City.
Meanwhile, CNN published closed-door 2016 audio of Bloomberg calling the rise of progressives like Senator Elizabeth Warren "scary" and claiming that, if he were to run for president, his platform would be to "defend the banks." The audio had been provided by an anonymous source who claimed to have once worked for Goldman Sachs, CNN said.
Warren, who has knack for turning sharp criticism into triumphant slogans, created a new URL called "ScareMikeBloomberg.com" where supporters could donate to her campaign.
The sparring will likely move from social media to broadcast television, as the candidates take the stage on Tuesday ahead of South Carolina’s February 29 primary, the outcome of which could make or break several of the candidates.
"The debate tomorrow night and the campaign in general … needs to be about one candidate and that’s Bernie Sanders," Bloomberg campaign strategist Dan Kanninen told reporters on Monday, according to POLITICO.
Bloomberg’s team previewed a strategy of attacking Sanders to POLITICO. As an unnamed top aide told the publication: "We’ve trained our eyes on him."
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