Terra Firma Chief Takes Shots At Hedge Funds

Feb 24 2012 | 8:40am ET

Private equity honcho Guy Hands doesn't think much of the other side of the alternative investments industry.

The Terra Firma chairman told the Harvard Business School Venture Capital and Private Equity Conference that unless students "love making businesses better," they should join a hedge fund and leave "the creation of long-term value" to p.e.

"If you are looking for a career just focusing on making money, please don't come in to the private-equity industry," he said. "If just making money is what motivates you then focus instead on the banking industry or the hedge fund industry."

Hands went further, noting that the p.e. business is harder than most others, where small mistake can get swept away. "In private equity," Hands warned, "one mistake can be fatal."

Hands spoke in more depth of his 40 years in p.e., calling himself the "father of securitization" and calling the glory days of 2002 through 2007 the "Woodstock years" for private equity. The end of that period, and the beginning of the "wilderness years," were marked by Terra Firma's purchase of record label EMI. The firm eventually lost control of EMI to Citigroup last year.

"As with all private-equity firms we suffered from the collapse of the credit markets in 2008," Hands said. "While most of our businesses survived the downturn and are continuing to do well, unfortunately we lost control of EMI, the company on which we did our most successful turnaround but also suffered our most major loss."

"With EMI our business plan was right and we more than doubled earnings over three years. But the securitization of the receivables we planned was never possible and the debt proved unrefinanceable, hence Citibank seized the company and sold it."


In Depth

Whisky Business: The Ultimate Liquid Alternative Investment

Sep 15 2014 | 7:02am ET

David Robertson knows his single-malt whisky—he was the Master Distiller at the...

Lifestyle

Hedgies Rock Out For Children's Charity

Sep 15 2014 | 8:40am ET

It's that time of year again—when hedgies trade in their spreadsheets for guitars...

Guest Contributor

Volkered: How Financial Sector Reforms are Creating Opportunities for Hedge Funds

Sep 16 2014 | 11:28am ET

New regulations have dramatically curtailed proprietary trading activity in investment...

 

Editor's Note

    Get A Sneak Peak Of The Alpha Pages

    Aug 25 2014 | 11:21am ET

    As many of you know, FINalternatives was recently acquired by the owners of Futures magazine, a firm called The Alpha Pages LLC. Today marks the soft-launch of a new sister site for both publications. As its name suggests, The Alpha Pages will cover all types of alternative investments, going far beyond the more well-known ones such as hedge funds and private equity. Read more…

 

Futures Magazine

September 2014 Cover

The London Whale: Rogue risk management

The London Whale saga is a twist on the typical rogue trader story as the rogue trader recognized the error of his ways and was prepared to take his medicine but was instructed by superiors to “defe...

The Alpha Pages

TAP July/August 2014 Cover

The Alpha Pages Interview: Senator Rand Paul

Senator Paul sat down in the debut series of the Alpha Pages Interview to discuss the broken tax code, regulation surrounding Bitcoin, and his plans for the 2016 Presidential election.