Citrin Cooperman Annual Report on Independent Sponsors Reveals a Growing Industry Becoming Ever More Sophisticated


When we launched the first Citrin Cooperman Independent Sponsor Report last year, our goal was to shed a light on the largely unchartered landscape of the independent sponsor world, the “Wild West” of private equity, as one of last year’s esteemed contributors Bruce Lipian aptly described it. Last year’s Report was the first of its kind, reaching a large number of independent sponsors (245 to be exact) on a
wide variety of topics – firm evolution, deal flow, capital raising, economics and liquidity events, among others.

This year, we wanted to capitalize on the success of last year’s Report and to dig deeper. We continue to explore the themes covered last year, but we have also expanded our analysis of economic terms, in response to feedback from many of you. In a sector where one broken deal can be financially
devastating and one successful liquidity event can set you up for life, the stakes have never been higher. And so this year, based upon responses from over 200 independent sponsors, we have identified typical” terms and calculations while also finding considerable variation in economic structures. By sharing these data points, both the typical and atypical, it is our hope that independent sponsors and their capital providers will have a greater understanding as to what the market will bear.

When we started our independent sponsor survey effort last year, there was no playbook for the sector. This year, we hope to create the beginnings of one so that all independent sponsors – novice and experienced alike – may benefit from the findings shared. We are indebted to our survey respondents and our esteemed group of external contributors, both independent sponsors and capital providers, for sharing their insights with us and for making this year’s Report possible. We hope that you enjoy the Report, and we look forward to discussing our findings with you.

Sylvie Gadant, Partner, Citrin Cooperman



This is Citrin Cooperman’s second Independent Sponsor Report. This year’s Report incorporates results from an online survey and interviews with leading independent sponsors and capital providers. Some statistics used throughout the Report may reflect rounding.


This year, 208 professionals in the independent sponsor space shared their views on industry outlook and operational issues such as deal flow and mechanics, capital sources, deal economics, relationships with portfolio companies and liquidity events. The survey was conducted in April and May 2018, and interviews with leading independent sponsors and capital providers were conducted in July 2018. One hundred and seventy five respondents identified themselves as independent sponsors. Like last year, the majority of these independent sponsors are at firms that have been in existence more than five
years. Most firms (60 percent) have two or three principals, and 27 percent have only one principal. The majority have one non-professional staff member. All major regions of the United States are represented by our respondent population.

Not surprisingly, many of the younger firms (80 percent of them) represented firms (80 percent of them) represented in our study (defined as those in existence less than five years) have not had a liquidity event. Among older firms (those in existence more than five years), 25 percent of them have had four or more liquidity events. Of those firms that have had liquidity events, 12 percent have returned an average realized equity multiple of greater than 5x.

The independent sponsor space has experienced a significant evolution over the past two decades. In
the early days of the model (back when independent sponsors were still known as “fundless”
sponsors), former private equity and investment banking professionals dominated the space. But now,
as our research shows, professionals from other backgrounds – company management/ operations
and consulting, among others – are seeing it as a viable career path. They, like many, are embracing
the risk inherent in the model, realizing it allows them greater control over their investments and holds
the lure of outsize returns.

“The model makes good economic sense both from a GP and LP perspective: you have the benefits of
not dealing with the dollar cost averaging of multiple investments and fund management issues
associated with committed capital,” explained David Acharya, Partner, AGI Partners LLC. “In addition, the model has strong limited partner alignment on issues such as fees, carried interest and discretion to review each investment opportunity.” Like the independent sponsor sector itself, the firms represented by our respondents have also meaningfully evolved over the years.
Once our respondents gained a track record, they found that capital flows more freely. Several
noted that they are now seen as a legitimate alternative to funded groups, whereas early on, that was not the case. Many respondents described how their network of capital sources expanded and changed over the years. For some firms, capital partners have become more institutional. Other firms partner with family offices. Repeat funding relationships have become an option, especially for those with decent track records.

Deal sourcing strategies have also changed for our respondents through the years. When many independent sponsors were just starting out, broker referrals and auctions were the dominant sources of deal flow. Once independent sponsors developed a track record with a few deals under their belt, inbounds and proprietary deal sourcing became more popular.

In addition, many of our respondents have become more selective in which deals they pursue. Some avoid auctions entirely. Others have changed their focus, for example, moving up-market to focus on control buyouts or companies with higher EBITDA. However, all independent sponsors face a uniquely tough situation – the need to balance myriad demands – sourcing, portfolio management, capital partner relationships and general operations to name a few – with limited resources. In response, many of our respondents have added personnel, both principals and junior staff, which enable them to  respond quicker to inbound opportunities, source more deals, allocate resources more efficiently and manage investments more effectively. Streamlining processes is also essential to scaling an independent sponsor firm. Recognizing this, our respondents have employed various strategies: implementing CRM systems to manage investor and contact relationships, creating investor portals, establishing protocols
for investigating deal leads, managing due diligence and streamlining portfolio management. “Replication of returns comes from replication of processes,” advised John Fruehwirth.



As the independent sponsor model has grown in popularity over the past two decades, it now has more credibility and traction with capital sources. “In the 90’s, independent sponsor deals were typically referred to us,” said Evan Gallinson, Managing Director, Merit Capital. “But we soon realized we were getting good deals from this source, then called fundless sponsors, and they were adding great value
post-close.” Merit Capital launched a specific outreach effort and created its first fundless sponsor conference in 2005. “Now, we are the ones actively seeking independent sponsors and proactively trying to build relationships,” he added. “These relationships have also developed into more of a two-way street, and we sometimes are referring out deals to independent sponsors when the deal isn’t right for us.” Gretchen Perkins of Huron Capital agreed. “We are in active outreach mode to independent sponsors. We want to maintain visibility with this crowd and be there for them when they find an opportunity and need capital to complete an acquisition.” Capital sources available to independent sponsors have also expanded significantly. “Even in the past five years we have seen a radical change,” said John Fruehwirth, Managing Partner, Rotunda Capital. “Endowments, families, and institutions recognize there is good talent in the independent sponsor field, and they are trying to harness it
through one-off or repeat relationships………FULL REPORT HERE 


Buy-Side Pay in London and NY: Hedge vs PE

When it comes to the buy-side, you’re bound to earn just a tad more working in private equity than at a hedge fund. You’ll also have a better chance of taking home a bigger pay package if you work in New York as opposed to London, though the geographical difference isn’t near as stark in private equity as compared to hedge funds, according to new analysis.

As you can see in the first chart below, senior-level private equity professionals – people at the director level or higher – take home an average of roughly $576k if they work in New York, according to The Pay Index, a salary database powered by financial recruiter Leathwaite. In London, total compensation for private equity professionals drops to $491k, nearly a 15% difference. Meanwhile, at hedge funds (second chart), senior professionals earn an average of $548k in New York and $437k in London, more than a 20% difference.

While people working in private equity earn a bit more than those employed by hedge funds, the latter group doesn’t need to wait nearly as long to see if the fruits of their labor. Deferred cash and stock compensation only make up around 12% of total pay at hedge funds. That number balloons to nearly 34% for private equity professionals working in New York and London – around 4 percentage points higher than the global average.

So, if you knew where each path led, which direction would you take? In New York, for example, senior private equity staff earn, on average, around $28K more than hedge fund employees in total compensation. But they also see $136k more in deferrals, usually in the form of carried interest, which may take years to be realized. Would you rather take the cash in hand?

Private equity pay London and New York

Hedge fund pay, London and New York

Pitch Book Named Best Research Provider

SEATTLE, March 20, 2019 /PRNewswire/ — PitchBook, the premier data provider for the private and public equity markets, announced today it has been named the Best Research Provider by Private Equity Wire, as part of its 2019 Private Equity Wire Awards. Private Equity Wire is a leading publication serving institutional investors, wealth managers, investment managers and advisers across all asset classes. The Private Equity Wire Awards are based on a ‘peer review system’ whereby Private Equity Wire’s readers elect a ‘best in class’ in a series of categories via an online survey. Categories include, best private equity managers, investors, consultants, advisers and service providers. Audiences recognized the value of the PitchBook platform to fundraise faster, build custom benchmarks, source investments targets, conduct smarter due diligence, plot exits and ultimately drive value for portfolio companies.
“At PitchBook, our mission is to deliver a better way for our clients to do their job,” said John Gabbert, CEO and founder of PitchBook. “Winning the Private Equity Wire award for Best Research Provider based on client and peer voting is a tremendous honor and validates our dedication to providing the highest quality data and unparalleled customer service.”
Since launching in 2007, PitchBook has become the go-to resource for data and research on the private financial markets, including private equity, venture capital, and mergers and acquisitions. The PitchBook Platform, mobile app, API and analyst research empowers users to make informed investment and business decisions by surfacing hard-to-find financial data on companies, investors, funds, LPs and service providers. PitchBook is one of the fastest growing financial information companies in the world, having seen a 65% increase in customer base in 2018 alone and nearly doubling global headcount since 2016. For PE firms in particular, the PitchBook Platform has informed some of the most influential deals in the space with its mission-critical intelligence and real-time private- and public-market data that allow PE firms attract and retain the best investors, identify and vet investments and generate market-beating returns.

Looking at Hedge Fund Pay in NY & London

From efinancial careers:

Among the biggest misconceptions about hedge funds is that everyone takes home massive seven-figure paychecks. The fact is, less than 10% earn more than $1 million annually. That said, reaching the upper ranks at a profitable hedge fund can provide a very comfortable financial future – as long as the firm can manage to keep its doors open, something many have struggled to do in recent years.

Using data from The Pay Index, a salary database powered by financial recruiter Leathwaite, we broke down average compensation for senior hedge fund professionals – people at the director-level or higher – for both New York and London. We also looked at their average base salary, bonus and any deferred cash or stock compensation over the last 18 months. The gender data is in the second chart below.

As you can see, senior hedge fund professionals in NY come out well ahead, taking home roughly $548k, with base salary and bonus totals closely mirroring one another. That bests the average in London by more than $100k. The $437k in total compensation across the pond also includes 16% in deferred salary, compared to just 11% in New York. But the biggest difference is with bonuses. Senior New York hedge fund professionals earn an average bonus of $241k, compared to just $164k in London. Based on any metric, you’re liable to earn quite a bit more in the U.S. financial capital than in the U.K.’s.

Meanwhile, we also looked at how senior male hedge fund professionals fare compared to their female colleagues. As there aren’t that many women in the senior ranks at hedge funds, we compared the numbers globally to ensure a statistically significant number of responses were included. Like in other recent studies, the numbers reveal a significant pay gap. Men take home around $74k more than women, a difference of roughly 15%. Moreover, women see around 18% of their total compensation deferred, compared to 11% for men, who also earned a 32% bigger bonus.

The 15% gap is actually a smaller figure than ones found in other recent studies, including Citi’s. The bank said in January that women at the firm earn 29% less than men. While calling it an “ugly number,” Citi CEO Michael Corbat said the bank is more than 50% female. He pointed to the “imbalance at the senior job and leadership level” as part of the explanation for the gap. Leathwaite’s numbers don’t include junior positions, so the difference at hedge funds can’t be explained away based on seniority. However, the positions women hold at hedge funds may play a prominent role.

A 2018 Preqin study found that women account for 26% of senior investor relations and marketing roles at hedge funds. Meanwhile, women hold just 6% of better-paying senior investment jobs. Ironically, several different studies have found that female investors and financial advisors generate better returns than their male counterparts, mostly due to making fewer trades.

Report from Goldman Disputes That Corporate Tax Breaks All Went to Stock Buybacks

Growing up I watched my father quickly debunk anything thrown his way that lacked factual underpinnings by waving his hand in the air and loudly proclaiming it as “nonsense”!
Last week David Kostin, the well regarded Goldman equity strategist channeled my father by declaring the oft repeated narrative that corporate tax cuts were only used for stock buybacks as NONSENSE.
Kostin writes in his report that “Growth investment has accounted for the largest share of US corporate cash outlays every year since at least 1990.” He continues by showing us the data indicating that in 2018, S&P 500 companies increased their spending on capex and R&D by 13% to $1.1 trillion. “This fact is contrary to the popular belief advanced by some politicians that buybacks dominate corporate spending.” said Kostin.
He continues, “US companies have consistently returned cash to shareholders for nearly 140 years. This established historical pattern contradicts the perception of many commentators that significant cash return is a recent development.”
Most interestingly in the data is the lopsided stock buyback programs indicating the practice was concentrated in a handful of companies. “In 2018, buyback spending jumped by $279 billion or 52% above the prior year’s level. However, just 20 stocks in the S&P 500 index accounted for 38% of the $819 billion in aggregate cash spent to repurchase shares during 2018, but those firms represented fully 69% of the $279 billion overall increase in share buybacks. Unsurprisingly, these companies from six different sectors also had the largest amount of earnings trapped overseas.”
Clearly that level of inflows into the US economy was beneficial in numerous ways.
So next time someone argues that corporate tax reduction is used primarily for buybacks, tell them to call Mr.Kostin. He will say that notion is NONSENSE!

Parker & Armondo Join Rockefeller Capital Management to Help Lead Wealth Management Expansion

Michael Parker, formerly RBC’s wealth management head of recruiting and Michael Armondo, formerly Merrill’s Market Executive in Dallas have joined Rockefeller Capital Management to help build out the firm’s wealth management business.
The Parker and Armondo hires follow on the heels of a flurry of hires over the last year by Fleming and his high powered team as they continue their strategy to turn Rockefeller into a full-fledged investment manager.
Mike Fleming has been laser-focused on growing the firm to a $100B business, and with deep-pocketed Viking Global funding the growth, he has wasted no time. Last fall he acquired Greer Anderson adding a quick $200m in AUM.
Fleming’s investment banking experience is a perfect fit to help build a company via acquisitions. After the Greer deal was announced he said: “We’ll do more acquisitions. I have done a lot of acquisitions my whole career. “
Fleming appeared to be in the running to be the next head of Morgan Stanley, but surprised many last year when he left and joined the Rockefeller business. So far he is leaving no doubt among observers that he is quite capable of both running and building a Wall Street firm.

How to Be The Type of Person Everyone Wants to Know…guest article by Hazel Gale

Some people are simply a joy to be around. The conversation flows effortlessly. You laugh. You’re genuinely interested. You look forward to seeing them, and when you part ways you feel like their company was a valuable use of your time.

Obviously, this connection has partly to do with how much you have in common, but I think there’s more to it than that. This person usually has a secret ingredient.

Understanding your mindset
According to psychologist Carol Dweck, a person’s mindset can come in two flavors: fixed and growth. By understanding the difference between the two, we can shed light on why some people are better than others at showing us a good time.

In a nutshell, someone with a fixed mindset believes we are what we are, and that things — meaning personality traits, capabilities, beliefs about ourselves, etc. — don’t really change. For example, with a fixed mindset, if I’m bad at maths, then that’s just the way I am. I’ll always be bad at maths. There really isn’t any point in trying to improve my skills. If I believe myself to not be a funny person, then that will continue to be my destiny, etc.

On the other hand, an individual with a growth mindset believes in constant evolution. I am what I am now, but that’s different from what I was before, and what I will be in the future. If I’m bad at maths now, I can work at it and potentially become a maths genius — given the proper motivation, of course. If I don’t find myself to be very funny now, I can practice my joke-telling skills and comedic delivery, and maybe I’ll have them rolling in the aisles one day. Everything is a matter of effort.

Some people tend more toward a fixed mindset and others toward that of growth, but it’s not entirely binary. Most of us will shift between the two outlooks depending on our situation.

The way we evaluate our personal sense of worth, success and ability differ depending on our mindset. The fixed mindset individual judges themselves against others. In order to feel good at something, they have to be better than everyone else around them, or at least somewhere near the top. When this is the case, fear of failure is ramped up, and they’ll be likely to shy away from challenges, even — in fact especially — in the areas they consider themselves gifted. This is because any failure suffered threatens to jeopardize their “talented” status. One slip up and they’re no longer the genius they, or others, thought they were. Better to not risk it at all.

Furthermore, this mindset breeds arrogance, because — looking down from their fiercely protected spot at the top of the heap — a fixed mindset individual genuinely feels superior to the people they surround themselves with. In fact, they need to think in this way in order to feel of worth.

The growth mindset individual though, will feel successful, worthy, and purposeful when they’re learning. What this essentially means is that failure, as a concrete idea or our general understanding of it, doesn’t really exist, because the harder a task or an undertaking is, the more we stand to grow as a result of doing it — even if we don’t do it perfectly. With a growth mindset, we welcome challenge because instant success and recognition are not the ultimate goals.

Needless to say, in the long run growth-minded people have the potential to go further, and grow bigger, in all aspects of their lives.

So how does this apply to being great company?
Some fixed-minded people tend to act in a way that can make us feel small, and they seem to relish that outcome. They’re the ones who smirk when we slip up, the ones we wouldn’t want to show an unfinished project to, or see us in tracksuit trousers and a battered t-shirt first thing on a Sunday morning. They’re the ones we wouldn’t want to say anything stupid in front of, and if we did, we would feel the need to justify ourselves to save face.

If someone slips into a fixed mindset, suddenly everything and everyone around them begins to function like a mirror. They’re forced into a perpetual state of self-referencing. They ask: “How does this friend, topic, job, choice of music, etc. make me look?” And it can be contagious. Like a bitchy, competitive group of school children, everyone around a fixed person can catch the bug, and end up falling into an uncomfortable pattern of one-upmanship, which can quickly turn ugly.

So a fixed-minded friend can be uncomfortable to hang out with because they have the potential to handicap our growth as well. Anticipating judgment causes us to take up a defensive stance, and because we’re busy protecting ourselves, we hold ourselves back. We can’t take on risk when we’re under threat. We can’t stretch ourselves when we’re fearfully clinging to a sense of self-worth that seems to suddenly be under fire.

On the flip side, there are really good times to be had with those who make us feel comfortable enough to explore. When we’re with growth-minded people, were present. A freedom to engage more fully develops out of liberation from any need to check or contain ourselves. If someone we’re with is in a growth mindset, we can sense their abandonment of the concept of failure, and so we can be infinitely more comfortable in making mistakes.

Additionally, because growth-minded people don’t have to look in those proverbial mirrors all day, they’re better able to see the Other, and they’re able to connect with those around them in a much more authentic way. In the company of this kind of person, it’s easier to feel understood and welcome. And when we feel accepted, we can let go of our own need to constantly self-reference. Suddenly, the space between two people becomes the focus, and is more easily filled with meaningful conversation or activity or whatever else it might be that we can learn the most from at that time.

With competition off the table, growth-minded people feel genuinely happy for our successes, and we can feel unconditionally proud of theirs too. These are the people whose good moods lift us up. Their bad moods may not be completely absent, but they seem rare and don’t drag us down with them. They’re the ones who will ‘like’ your stuff on Facebook without feeling like they’re handing over some of their power.

Some of my oldest and greatest friends are exactly like this, but having a growth mindset is not a quality that’s reserved only for people we know inside and out. Generally, you can sense it in a person the moment you meet them. And this isn’t just because they’re pandering to you, either. It’s not necessarily only the people who wouldn’t criticize a work in progress, or laugh at the stupid thing you just said. But rather, when that stuff happens, we don’t feel as if they’re mentally removing chips from our worthiness stack.

For people living in the developed world — meaning those of us for whom basic survival isn’t an enormous challenge — our deepest worries seem to spring from questions regarding our adequacy; our good-enoughness. But good enough for what? Or, perhaps more importantly, for whom? When you really ask yourself that question, it usually boils down to comparison and other people’s perceptions, in one way or another. At the root, our greatest fears concern our likeableness. Our lovability. And it’s those fears that can freeze us into a fixed mentality.

So there’s a sad irony to all of this. Although fixed people can come across as arrogant and superior, it’s often a deep, and sometimes unconscious, insecurity about themselves that causes them to behave in that way. What this means is that the people who compete with others are usually doing so out of a desire to feel worthy of those same people’s admiration, love or attention. But of course, by striving for connection in this way, they’re far more likely to achieve the opposite.

You can be truly great to hang around with when you accept yourself as an evolving entity. Be comfortable with the fact that you’re growing, not grown. What I’m not saying is that you have to be 100 percent self-assured to be fun to know and be around. That would be a daunting ask, and overconfidence is usually a trait that belongs to the fixed category anyway. What I am saying is, being enjoyable to hang out with has more to do with being comfortable with your vulnerability. It’s about being able to let your guard down because you know that your weaknesses don’t define you.

If mindsets are contagious, then there’s no real way to know who caught the fixed bug first in any relationship. It could have been you, or it could have been them. But awareness of the two mindsets, as well as your own thought patterns, means that you have the potential to dole out the antidote as well as the ailment. By adopting a growth mindset, you can put a stop to the epidemic and inspire others to grow with you.

So take yourself less seriously because your imperfections are the things that people really connect with. Learn to laugh at yourself and enjoy the fact that others can do the same. Be the student, not the teacher. Ask questions when you don’t know something, and don’t worry so much about f*cking things up. In the end it means that not only you, but also anyone you spend time with stands a better chance of enjoying life.

READ MORE from Hazel:

GET HAZEL’S BOOK: Fight: Win Freedom From Self-sabotage

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Order it now on Amazon.

Telephone: +44 (0)7870 180 548
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Nussbaum’s Nut Tree Reaches a $1B AUMb

Opportunistic alternative credit investment manager Nut Tree Capital has reached $1B in total AUM. The firm, led by founding partner and CIO Jed Nussbaum, is part of the Bahrain based Investcorp Hedge Fund Partnership platform. Lionel Erdely, head of the platform said “From the first day we met Jed and his team back in 2015, we have been confident in the firm’s holistic approach across the capital structure, focus on fundamental research and portfolio construction, and deep experience in managing portfolios and teams.”

Investcorp’s platform was launched in 2004, was one of the first in the alts space to provide seed and acceleration capital to managers. Its’ most recent addition was Shoals Capital.

Mackenzie Launches Three New Liquid Alt Funds

Mackenzie Investments announced the launch of three new liquid alternative funds. The newly launched funds will be part of the investment firm’s alternative investment offerings which currently includes their multi-strat absolute return fund.

In a statement released by Mackenzie, Mike Schnitman, SVP of Products said “We can now take a modern approach to portfolio construction that will create opportunities for stronger, better-diversified portfolios and outcomes for our investors. By using liquid alternatives’ winning combination of more diversification and lower correlation to the markets, we can help provide investors with improved portfolio stability with less reliance on market direction.”

In the same statement Mackenzie Investments President and CEO Barry McInerney said “Our alternative solutions open up new options for investors, so that they can be better positioned to reach their long-term financial goals.”

The new funds’ strategies are:

Mackenzie Global Macro Fund: Long/Short in equity, fixed income, commodities and currencies.

Mackenzie Global Long/Short Equity Alpha Fund: Long/Short global equities. 

Mackenzie Credit Absolute Return Fund: Total return fixed income.