When the ‘Big Payday’ Never Comes: Inside Private Equity’s Meltdown

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Chris breaks down the mass departure of mid-level talent from major private equity firms as employees finally realize the big payouts they were promised may never materialize. With firms unable to offload overpriced portfolio companies, carried interest evaporating, and valuations stuck in fantasy land, the golden handcuffs have turned to rust. If you’re trapped in an illiquid PE investment, Chris explains what’s coming next — and how to get help before things get worse.

Episode Transcript

Speaker 1 (00:00):
The Watchdog on Wall Street podcast explaining the news coming
out of the complex worlds of finance, economics, and politics
and the impact that we'll have on everyday Americans. Author,
investment banker, consumer advocate, analyst, and trader Chris Markowski don't
help me.

Speaker 2 (00:17):
Got a mass exodus happening at private equity firms all
over the country. Again, we told you this was gonna happen. Yeah,
all these big, big private equity firms, and a lot
of people got in the the the partners there, Yeah,
a partners thinking they're gonna get rich rich. I tell you, well,

(00:41):
they've been waiting for a long time. A lot of
the employees at these private equity firms waiting to get
paid out. They're not waiting any longer. They're jumping ship.
You stay at a larger private equity firm. When they
eventually again are able to offload whatever company that they bought,

(01:07):
that they supposedly made better, that they are selling at
a higher price, they find again the greater fools out there.
Not always, but I'm telling you ninety five percent of
the time, if not more. Heyse, they're not scientific numbers.
I'm just giving you by the best guestimate here finding
the greater fools out there that are paying at a

(01:28):
higher price. Right now, the big private equity firms cannot
find anybody to offload. They're junk on again. If it
was worth it, people would buy it. So many employees
that these companies are now underway out the door looking
for jobs at actually smaller shops. I mean they're they're hoping.

(01:54):
They're hoping that, you know, they're going to be able
to maybe earn a little bit more, maybe moving and grooving,
but the fact they might be able to get paid
out a little bit quicker from a Wall Street journal
actually reported on this key form of compensation is driving
the moves. Mid level employees have big prestigious firms, leaving
potential paydays worth millions of dollars on the table. They're

(02:16):
worried about when and if they're carried interest or carry
pay tied to the performance of their deals will materialize.
That's the other thing too, that's the other bonus are
working at these private equity shops. There when you do
get paid out on these things, you don't pay income
taxes on this pay capital gains. It's funny. The golden

(02:39):
handcuffs aren't so golden any more. Top talent is doing
the math and realizing that a piece of a smaller
fund that actually performs beats a theoretical windfall that may
never materialize. Now, the people working at these big private

(03:03):
equity firms are leaving. They're they're they're they're saying, that's it,
that's it. I don't think these things. We're gonna be
able to sell these things, and they're getting out. What
does that mean for you who decided to buy into this? Yeah, yeah,

(03:25):
it's gonna be some tough sledding. Again. I'm not gonna
place see I told you so with people that are
locked up in these things. What I'm gonna tell you, Okay,
pick up the phone, go to our website, give us
a call. We'll see what we can do. We've been

(03:46):
helping people get out of ill, liquid, ugly investments for
some time. Okay, this is not our first rodeo with this.
We're obviously limited to what we can do. Will go
over your contracts, but again, you're gonna let your money
just sit there, sit there, and you're gonna now as

(04:10):
you're gonna sit there, you're gonna be paying management fees
on the money that's sitting there thinking that it's actually
an evaluation that is absolutely ridiculous. Quite frankly, they won't
even I mean, they gotta reprice a lot of the
stuff that the downside, maybe they'd be able to offlow it.

(04:30):
But if they do that, they do that, oh no,
then their reputations are gonna be it's spirals out of
control again. We've laid this out in the past. We're
here to help. Get to our website at watchdog on
Wall Street dot com.