How Private Equity Investors Make SO MUCH MONEY

Learn how Private Equity firms use leverage to juice returns and how it allows them to earn so much money.
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⏱Timestamps⏱
0:00 - Introduction
0:35 - How PE Funds Make So Much via Leverage
3:08 - How PE Compensation Works
6:26 - How Much PE Investors Make at Each Level
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
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All content in this video is for entertainment purposes only. I am not a professional financial advisor and my statements are not to be taken as instructions or directions. In addition, some of the links above are affiliate links, meaning that at no additional cost to you, I may earn a commission if you click through and make a purchase.

[@rareliquid]

Sorry frands caught a mistake after publishing the video - at 1:43 the return is actually 500% (not 400%) because you go from a $20M investment to $120M. Lmk if you have any questions! 🧑‍🏫Wharton / Wall Street Prep PE Certificate Program🧑‍🏫 ► Learn from real investors (including the founder of Carlyle) about the private equity industry ► Use code RARELIQUID for up to $500 OFF for ANY cohort ► tinyurl.com/5n8kr4tz 🍎Sign up for my courses🍎 ► How to get into MBA programs: forms.gle/9yEyycuP7NnQBjue8 ► How to get into investment banking: forms.gle/wt4cZrezbxVgNzGUA

[@haroonhamid5352]

I started panicking then I saw this comment. Lol, love your videos btw. I was wondering if you've ever had to use much SQL in your career?

[@OscarGarcia-fe5bu]

Also would like to add a note, PE firms don’t pay off the debt, they leave the debt burden on the company. That’s how they make their leverage returns.

[@callumgourlay606]

Comparing PE founders and IB CEO's net worth's is a bit disingenuous though, the reason their net worth's differ to such a degree is their equity in the company. The PE founders have far larger proportions of their firms equity so they are entitled to a far higher amount of the profits, whereas CEO's at the end of the day are employees and even with their stock options bonuses, own tiny percentages of their firms.

[@ankurdass6885]

Mate need one on quantitative hedge funds and how to break into them.

[@rareliquid]

hm ill do my best

[@eleven797]

@@rareliquidI agree

[@kingnay08]

Doooo it… do it 😂

[@meecheongkim3980]

Did you invest in a hedge fund?

[@kevinsuh5313]

Great seeing your face this morning Ben!

[@matthuang21]

Great video Ben! Love seeing the PE content

[@chriswalter92]

Private equity sounds like a mechanism that extracts the most amount of value from a business, and transfers that wealth to the few general partners. Everyone loses - the business, the employees, the local consumers, the tax payers.... except for the general partners

[@tahirisaid2693]

The people you’re claiming don’t benefit wouldn’t have benefited with or without the private equity buyout. The business was failing before private equity came in, they just more efficiently manage the end of the companies life. Most likely allowing most companies to work there longer than they would have been able to do before.

[@advitiyajadhav6452]

Great Video!

[@laidonald.0517]

rlly great content! def need one for venture capital and hedge fund!

[@hullopillow4853]

And the rich investors, endowment funds would be better off holding sp500 index funds or berkshire stocks, instead of paying the 2/20 that make these pe bankers rich.

[@hunter4243]

When doing trading comps how much wiggle room do you have regarding Market Cap? Say the company I want to compare has a 54B market cap. How low/high can I stray from 54B with the comparable’s?

[@ishandate7255]

can you earn the carry portion each year or do you have to stay there till the fund closes

[@Pranavag2003]

Hey man i was wondering how does carry work. Like do you get the amount at the end of the fund or during the fund. Like if a funds lige cycle is 4 years then do we get it during that life cycle or at the end of that lide cycle? How does it work 8n different pe firms?

[@hilalalkhalili6267]

Great content! If I may though point out that it is no an apple-to-apple comparison when you discuss pay difference between bank executives and pe firm founders since the latter’s wealth was driven mainly from large equity ownership that increased significantly in value over decades and the former’s was mainly from salary + bonus compensation (and yes with some additional share compensation but not even close in magnitude to that of founder’s generally).

[@genznischal]

Yoo Ben ! Watching you for the past two weeks and became kind of a fan! Potential collab for video editing or thumbnails?

[@mercedbread9045]

Possible to move from corporate credit to PE?

[@jarredkatz1467]

@rareliquid awesome content, thanks for sharing

[@MrSumansai]

Thank you I understanded little bit 😊😊😊

[@andrew_.g]

Where did you do your undergrad

[@easonjiang3150]

dude could you make more videos regarding crypto/web3 vc?

[@UNKNOWN-1589]

Ben is my GOAT

[@anniesshenanigans3815]

by obliterating a business. that is how they make money. Sadly a lot of people think they are fantastic for their business until it falls apart. I am seeing this currently in the job I have and the higher ups are like "la la la things are great" as one by one they are losing their jobs. As a lowly worker that actually produces the product/income, I won't lose my job. But I will leave eventually because the conditions will be so bad it will leave me no choice. Been thru at least 3 of these types of takeovers in my career. Healthcare should never have allowed this.

[@yvs272]

Hey man! I've been watching your videos since i saw your video on how you prepared for GMAT and it helped me a lot! I got a 760 on the GMAT and now I'm applying to B Schools. Could you let me know my chances with the average GPA and 2.5 years work experience as a software engineer in a Fortune 100 company to get into Wharton or any other top schools? Thanks a lot!

[@doniii4038]

keep doing your thing bro!

[@yvs272]

@@doniii4038 thank you!!

[@lovetnlife]

Would love to see this on Venture Capital Cross-

[@DeaconAL35]

Can you make a video on how to find angel investors for real estate..

[@lenukhs6275]

when are you launching the investment banking course?

[@rareliquid]

taking a while to work on but aiming by end of this year

[@Jayhawkfinance]

Is there a specific type of keyboard used in private equity? I am in real estate finance for a relative's firm and always searching for ways to improve my efficiency

[@israelmedina706]

?

[@sean658]

Jesus Christ this is pathetic

[@Jayhawkfinance]

@@sean658 don’t cry

[@MessAroundNFindOut]

One on quant hedge funds

[@Omar-sq6zz]

You missed calculating the interest rate on the debt. I think you would make a little less than 400% if you take into account the interest rate. They probably have a line of credit that was extending to the PE firm and they would need to pay back the debt + an interest rate. Correct me if I'm wrong. Thank you so much for your videos and dedication for teaching us.

[@dffrnttd9474]

You're correct thought the same thing, and it's material as this is usually high interest private debt not bank debt. And the time period it takes to realise the $200m value becomes quite important.

[@FrenchPaperz]

The debt is on the portfolio company level and not on the fund level. So the PE firm does not pay interest nor amortizes debt. The portfolio company does it.

[@kenng7289]

Ugh I should have done PE instead!

[@margaretapersson7022]

How come there are so many potential portfolio companies in the US to identify and buy into; these companies are supposed to be badly managed by the present owners. Are these owners not able to understand how they could improve the company themselves?

[@moneyronn__]

ISO PMP FOR REI

[@fturesa3920]

Are cryptocurrency and business incompatible? I think youre not keeping up with the news. While you thought it was impossible, some enthusiasts from Cannafarm Ltd integrated cryptocurrency into the production of medical cannabis. What do you say now?

[@deepikaatkinson4111]

Good info - just slow down while explaining..😊

[@Omar-sq6zz]

Assuming that you would make a return from all the investments.

[@rareliquid]

yup but pe investors tend to be quite conservative and invest in companies with good cash flow so tend to do pretty well

[@jg7088]

Grad school aged u man haha

[@rareliquid]

sad

[@bacool]

It was Coachella

[@edoardogiacobbe4822]

Always the same four concepts…

[@donnnnn92]

nice video. but you talk so fast...

[@nineseven420empire3]

By selling overpriced crap........

[@LeoFreedom]

Wait, do you think cryptocurrency will crash? I dont think so. More and more companies are integrating cryptocurrency into their operations: Amazon, Cannafarm Ltd, Burger King, even Starbucks, dude!

[@aah4587]

My friend .. please talk slower .. it’s like ur running and talking

[@WiCapitalco]

So a giant shit show of leverage waiting to collapse

[@pony44]

Bro but what about the cost of debt? ....

[@ozlemelih]

Scam