Kim Kardashian is starting a private equity firm
Not just anybody can launch a new private equity firm; frequently, top employees at established PE firms or asset managers desire to launch their own fund in order to achieve better economics than the current arrangement. Those that desire to leave their current company for many motives, including social ones. Additionally, business executives with a vast network of contacts from whom to source deals like Kim Kardashian.
A new private equity firm focused on investing in consumer and media firms launches. Reality television star and entrepreneur Kim Kardashian is the face of the company alongside a former partner at Carlyle Group Inc. According to a Wall Street Journal report on Wednesday. According to conversations with Kardashian and Jay Sammons, their upcoming business will be called SKKY Partners.
The company will invest in industries like media, hotels, luxury goods, and consumer goods. Due to their appeal to young consumers and the TV personality’s enormous social media following, Kardashian has found success in her most recent business endeavors, including the shapewear company Skims and the cosmetics line KKW. In January, Skims had a $3.2 billion market value. SKKY intends to invest in businesses as both a minority and control shareholder.
Private equity funds are heavily exposed to beta. Generally speaking, their investments will rise and fall with the market, hopefully with a premium for their competence. Hedge funds come in a variety of forms. Equity long-short funds fluctuate with the market. They should compete more or less head-to-head with private equity funds, with better managers coming out on top. Private equity funds would need to outperform long-short equity funds by a small percentage annually. This is in order to be a comparable investment option because long-short equity funds are significantly more liquid than private equity funds.
What would a Kim Kardashian private equity firm do?
A private equity firm is made up of funds and investors who make direct investments in private enterprises. Or people who take over startups and businesses that may or may not be profitable. Companies with considerable growth potential are purchased by PE firms. They strive to use a long-term strategy to enhance their productivity and value. Sell the upgraded businesses eventually, ideally at a profit, and start new investments.
In 2020, when the entire globe was experiencing economic hardship, Jio made $12.1 billion through private equity investments. You might be shocked to learn that despite the pandemic, private equity investments rose 108 percent in 2020 over the prior year, from 665 deals in 2019 to 791 deals in 2020, valued at $33.8 billion. This information was gathered by Refinitiv. The sum of all PE transactions in 2019 was USD 16.2 billion.
Hedge funds that seek absolute returns aim for returns that are unrelated to important financial markets. As a result, they ought to perform better than private equity in lax or declining stock markets and worse in advancing ones. Again, it is manager-dependent. However, despite the tremendous equity returns over the previous eight years, an absolute return manager would probably be content with half of the private equity funds’ performance. An absolute return hedge fund, however, ought to have fared much better than a private equity fund during the 2007–2008 crash.
