Background and Role

• Elias Korosis shared his unique journey into private equity, highlighting his diverse experience across asset classes, including hedge funds.
• He joined Federated Hermes Private Equity 14 years ago and has been passionately involved in the sector ever since.

Key Topics Discussed

1. Love for Private Equity

• Elias emphasized his passion for private equity, describing it as an asset class where significant transformations occur.
• Unlike the zero-sum game of hedge funds, private equity involves building and transforming companies to achieve high returns.

2. Market Bifurcation

• The discussion touched on the bifurcation in the private equity market, with large asset managers accumulating assets and smaller ones specializing.
• Elias highlighted Federated Hermes’ focus on the lower mid-market and small-cap end, where substantial development work remains.

3. Investment Strategy

• Elias explained their strategy of prioritizing thematic exposure and partnering with specialist funds.
• He stressed the importance of understanding the business model and the management team’s ability to navigate challenges.

4. Due Diligence and Emerging Managers

• The conversation delved into the complexities of due diligence, especially with new managers.
• Elias described their approach of deal-first diligence, where they assess managers through specific transactions to gauge their capabilities.

5. Macro Headwinds and Market Conditions

• Elias discussed the impact of macroeconomic factors on private equity, noting that their less-levered transactions fare better when money is not free-flowing.
• He highlighted the importance of valuations and the rediscovery of Europe as a promising market.

6. Exit Strategies

• The importance of exit strategies in private equity was a key topic.
• Elias expressed a preference for exits other than IPOs, due to the loss of control over the company’s fundamental transformation once it enters public markets.

7. Continuation Funds

• Elias addressed the trend of continuation funds, which allow private equity firms to hold onto valuable assets longer.
• He emphasized the need for the industry to balance this trend with traditional blind pool fundraising.

8. Industry Transformation

• The chat concluded with insights into the transformation of the private equity industry.
• Elias predicted continued growth for large funds and stressed the importance of strategies to work with smaller players.

Conclusion

• Elias Korosis provided valuable insights into the evolution of private equity, emphasizing the importance of building and transforming businesses, strategic partnerships, and navigating market conditions.
• His passion for the sector and thoughtful approach to investment strategies offer a compelling perspective for anyone interested in the world of private equity.

Key timestamps:

00:07 Introduction to the Fireside Chat
02:03 The Nature of Private Equity
03:59 Market Trends in Private Equity
08:38 Investor Appetite for Mid-Market Opportunities
09:53 Due Diligence in Emerging Managers
15:43 Current Market Conditions and Challenges
21:44 The Rise of Continuation Funds
24:55 Transformation of the Private Equity Industry
27:23 Essential Skills for Private Equity Professionals