Stephen Feinberg, chief executive officer of Cerberus Capital Management LP, said the private-equity industry remains lucrative even as the size of new funds shrinks following the 2008 financial crisis.
“All of us are way overpaid in this business, it’s almost embarrassing,” Feinberg said today at the Super Return Conference in Boston. “The incentive fees are quite substantial if you do well. It’s almost ridiculous for people in our position to say there’s not enough money to go around.”
Buyout firms have cut the target size of funds as new commitments declined to the lowest level in almost eight years in the first quarter. Investors such as pensions and endowments remain reluctant to lock up capital for extended periods and have demanded lower fees. Cerberus’s new fund, which the firm is currently raising, will likely be smaller than the $7.5 billion predecessor pool, after that fund made an unprofitable bet on automaker Chrysler LLC in 2007.
Cerberus, based in New York, recouped 90 percent of that wager by selling Chrysler’s former lending unit, helping salvage the fund. The firm now sees opportunities buying assets from European banks, Feinberg said, adding he’s looking at Spain, Italy and Germany.
“Whenever you combine a recession with austerity, there are opportunities” Feinberg said.
Private-equity firms raised $42.3 billion in the first quarter, the lowest amount in almost eight years, researcher Preqin Ltd. said in April