Letters from Guy Hands the Chairman of Terra Firma
November 2011
Guy Hands' speech at SuperInvestor, Paris - "The best and worst of Private Equity; lessons from the wilderness years"
Guy Hands' gave the following speech at the SuperInvestor Conference in Paris on 16 November:
November 2011
2011 Q3 Letter (Extracts)
In 2007, the European markets, along with others around the world, were booming. There was a vast amount of equity and debt available. The banking sector was seen as very strong, and expectations of GDP growth were high. Four years on, the world has changed, and Europe in particular is a different place.
August 2011
2011 Q2 Letter - DA
In this economic environment, Deutsche Annington is an excellent asset to own. The stability of its rental portfolio makes it precisely the type of investment one wants to hold as the Eurozone comes to terms with the recapitalisation of its banking sector.
August 2011
2011 Q2 Letter - TFCP II and III
In a more volatile and uncertain world, private equity still has the ability to outperform the public markets. There may indeed be great investment opportunities for European GPs, subject to the availability of investment capital.
May 2011
2011 Q1 Letter - DA
Whilst the returns are modest on an absolute basis, they represent strong performance among real estate investments made in the 2006 timeframe. Moreover, we expect these returns to improve as we further develop Deutsche Annington.
May 2011
2011 Q1 Letter - TFCP II and III
Our experiences from those investments that went right and those that went wrong, and what we have learnt during this time, are driving us forward as we focus on sourcing acquisitions for TFCP III and exits for TFCP II.
February 2011
2010 Q4 Letter - DA
TFDA continued to recover from its low valuation as the underlying portfolio continued to perform well and the credit markets freed up thereby increasing valuations for companies with leverage.
February 2011
2010 Q4 Letter - TFCP II and III
The global economic environment was relatively benign in 2010 after several years of upheaval. The economies in which Terra Firma largely invests continued a slow process of recovery, experiencing modest growth in most sectors.
November 2010
2010 Q3 Letter
Those in the private equity industry who have the skills and resources to change the operations and strategy of businesses and who have the mettle to be contrarian will be able to generate attractive returns – even if their local economy is stagnating.
August 2010
2010 Q2 Letter
Private equity investing based on improving businesses through strategic and operational change will offer the best safe harbour for investment. With patience, discipline and hard work a careful private equity investor can still produce excellent returns.
June 2010
2010 Q1 Letter
This is an environment in which Terra Firma will find compelling investment opportunities, and our portfolio companies can generate value for our investors.
March 2010
2009 Annual Review Letter
I am delighted to present the third Annual Review of Terra Firma and its portfolio businesses. Those who have read our previous annual reviews will know that Terra Firma has always believed that private equity adds value for all its stakeholders through the fundamental improvement of the operations of its investments. In the current environment this is truer than ever.
February 2010
2009 Q4 Letter
As we move in to a new decade, many people have been saying good riddance to 2009 and the past decade. Well, 2009 was certainly not great, but it definitely turned out to be a lot better than most people feared.
October 2009
2009 Q3 Letter
My view on private equity is similar to that of Churchill’s on democracy as being “the worst form of government except all others that have been tried.”
September 2009
2009 Q2 Letter
We are now in the longest and deepest recession of the post war era. It is, therefore, entirely understandable that investors are continually on the lookout for any sign of recovery, the so-called ‘green shoots’.
May 2009
2009 Q1 Letter
If private equity is to justify its existence as an asset class in the future, private equity will need to find investments and build platforms which benefit from the structural problems facing the Western economies and capitalise on the growth in the East.
March 2009
2008 Annual Review Letter
I am delighted to present the second Annual Review of Terra Firma and its portfolio businesses. In the time since our last Annual Review, the financial world has changed beyond recognition.
March 2009
2008 Q4 Letter
We all know that 2008 was probably the most challenging investment year of our professional lives. The dramatic global decline in stock market values has destroyed more than five years of growth in the value of listed investments. But the deals that we are currently seeing are classic Terra Firma opportunities.
November 2008
2008 Q3 Letter
... Private equity has moved out of the glare of the spotlight and been replaced by stories of bank failures, government bailouts and system-wide collapse. This state of affairs seems to have encouraged some in private equity to try and act as if the events of 18 months ago can now be ignored, adopting an attitude of ‘out of mind, out of sight’. This is short-sighted.
July 2008
2008 Q2 Letter
The evidence continues to mount that the liquidity crunch that began last year will not be resolved anytime soon. There has been nothing but bad news in the financial markets so far this year. For private equity, this environment poses a particular challenge as the current model for large, institutional private equity has not been tested by an extended period of adversity.
May 2008
2008 Q1 Letter
... These times are not going to be easy for any private equity practitioner. But while the Terra Firma portfolio may be purely long, I believe it will weather the current conditions to deliver long-term value. However, we will have to work harder than ever and focus even more on our strategy and our businesses to create and maintain that value.
February 2008
2007 Q4 Letter
There seems to be a daily sea of articles and analysis about the causes of the current “credit crunch” ... In my view, the banks are only dealing with a fraction of their true potential credit losses. The full scale of the problem will only become visible over the next 2-4 years, and, I believe, will be 4-5 times the size of the losses that the banks have taken to date ... In my view, it is the incentive structures, both in the political and banking arenas, that are the major causes of today’s problems, and indeed it is here that one should look in order to prevent similar problems occurring again.
November 2007
2007 Q3 Letter
As we are all well aware, the environment that private equity faces has changed dramatically in the last few months. Some weeks ago, I attended a conference for senior LPs and GPs and what I found amazing was how incredibly positive the GPs were on the prospects for private equity over the next few years ... While I don’t want to be a doom-sayer, I felt I should share with you some of the issues facing the world markets that I shared with the conference attendees and which are keeping me up at night, in contrast to the sound sleep of my other GP colleagues.
August 2007
2007 Q2 Letter
As Europe closes down for its annual summer holiday after what has been a very turbulent time in the market, it is appropriate to reflect on the four key objectives Terra Firma set itself for 2007, especially as this turbulence is likely to remain with us for some time. The objectives...
May 2007
2007 Q1 Letter
Private equity is now firmly in the big leagues. In 2006 alone, it: • made up 25% of the world’s M&A activity; • was the sponsor to 50% of IPOs; • issued 40% of all high yield debt; • accounted for 50% of leveraged loans; and • raised over $400 billion.
February 2007
2006 Q4 Letter
As a youngster, I was fascinated by those who excelled in their field and each Christmas received a Guinness Book of Records. However, it was never a wholly satisfying read. The records, facts and statistics were good for holiday trivia, but I never learnt the answers to the really interesting questions – what drove these people to achieve their record and how did they achieve it?
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