Two and Twenty: How the Masters of Private Equity Always Win
by: Sachin Khajuria (2022)
âBrilliant . . . eloquently takes readers inside the heroic world of private equity . . . [an] essential read.ââForbes
ONE OF THE MOST ANTICIPATED BOOKS OF THE SUMMERâBloomberg
Private equity was once an investment niche. Today, the wealth controlled by its leading firms surpasses the GDP of some nations. Private equity has overtaken investment bankingâand well-known names like Goldman Sachs and Morgan Stanleyâas the premier destination for ambitious financial talent, as well as the investment dollars of some of the worldâs largest pension funds, sovereign wealth funds, and endowments. At the industryâs pinnacle are the firmsâ partners, happy to earn âtwo and twentyââthat is, a flat yearly fee of 2 percent of a fundâs capital, on top of 20 percent of the investment spoils.
Private equity has succeeded in near-stealthâuntil now. In Two and Twenty, Sachin Khajuria, a former partner at Apollo, gives readers an unprecedented view inside this opaque global economic engine, which plays a vital role underpinning our retirement systems. From illuminating the rituals of firmsâ all-powerful investment committees to exploring key precepts (âthink like a principal, not an advisorâ), Khajuria brings the traits, culture, and temperament of the industryâs leading practitioners to life through a series of vivid and unvarnished deal sketches.
Two and Twenty is an unflinching examination of the mindset that drives the worldâs most aggressive financial animals to consistently deliver market-beating returns.
The Reviews
Sachin Khajuria has experienced and succeeded at every aspect of the private equity business. From starting out as a junior professional and ascending to the vaulted heights of partnership at one of the major firms, to investing as a limited partner in several other major firms as well. Who better to not just share 'war stories', but to explain how the investment process works...from entry, to working to create/grow value at owned portfolio companies, to eventual exit. Using tangible (and relatable) examples, not just of deals, but of business development strategies for private equity, he is able to place the reader in the boardroom seats and in the minds of the various players on a deal team or on the management/partnership group.Perhaps most interesting, for the lay reader, is the realization through reading these cases, of how ubiquitous private equity has become and how broad its reach as an asset class. You cannot presume to understand financial markets without having a sense of how large private equity has become as an industry and as a steward of capital. Sachin Khajuria is your guide to this less well-understood, but very influential, piece of the global capital flows.
Great informative read in a no-nonsense style. The FT said this book âdemystifies private equityâ and it is right. Look forward to learning more about this industry.
A very insightful and interesting perspective of a tremendously influential industry. It is very well written, entertaining to read and easy to understand.
Private equity funds raise capital from wealthy investors or private and public pension plans. Most charge two percent of money under management for expenses and take 20% of the gains. Because they have accredited (i.e. presumably sophisticated) investors, they are subject to very few legal restrictions. Some do very well but because the space has become crowded, there is significant evidence that, collectively, private equity does not outperform the market once fees and performance charges are subtracted. But collectively, they can be disruptive because they will acquire investments and then exploit them before restructuring them for subsequent sale. This creates serious unemployment as labor is offloaded and in some cases, housing units are purchased wholesale in certain markets (using leverage) and then rentals are raised significantly or else mobile home parks are purchased and then the residents have to move their units or pay the freight . Then there is the carry trade problem. Outsized income is treated as capital gain (23.8% max in the US) rather than as earned income (39% max and higher) even though the risk capital is borne by others.Rather than a full discussion of issues involving private capital, the author appears as a total fanboy of the process. There is no critical process. Partners are bold, acolytes have their eye on a big pay day, most acquisitions deserve their initial comeuppance, etc. The author does not use actual examples. He fictionalizes his examples to conform to perceived reality like Steinbeck did in the Grapes of Wrath and Hemingway in For Whom the Bell Tolls. This is disappointing because the author appears to be well positioned to offer a fuller analysis of private equity based on his bio. However, we get laudatory adjectives seemingly out to infinity.
As an experienced financial professional and moderately experienced private equity LP I was hoping to have learned something from this book. In fact I was hoping this would be the equivalent of Sebastian Mallaby's Power Law for private equity.Instead this is an entirely non-critical view of private equity and private equity managers who seemingly can do no wrong in their quest to provide high returns so that teachers and firefighters can enjoy a comfortable retirement.No mention of the increasingly huge amount of money chasing an increasingly small number of good transactions or the variability of returns over the cycle.If you want to hear how amazing private equity is save time and money and contact the investor relations department of blackrock. If you want to learn how to effectively invest in private equity the answers are not here.
Sachin Khajuria has taken us into this world and made it so easy to understand this world. I am finding the book to be approachable, easy to read and complex information made easy to understand. Well doneâŠI would recommend this book to everyone who wishes to explore the world of Private Equity. Look forward to Sachinâs next book.. Author par excellenceâŠ.
