IMAGE: TEAM VENTURES
When a Kathmandu investment house prepares to list its shares, it might seem like a local curiosity. Yet Team Ventures, founded in 2016, is tapping into a question that has troubled financiers from New York to Stockholm: should private equity firms go public?
The firm describes itself as an “alternative investment” manager. It has backed fish-feed producers, ironmakers, hydropower developers and logistics firms. Its 13 investments to date include, among others, Annapurna Machha Dana Udhyog, Hulas Iron Industries and Bizbell. Six exits have been recorded, from a warehousing company to a provider of garage services. The most recent came this month, with the sale of Sinduli Agro. On July 18th it added to its portfolio with a stake in Dobhan Khola Hydropower. Team Ventures is still small, but its plan to float would place it in a lineage of private equity firms that have sought the legitimacy and capital of public markets.
That lineage is mixed. The first foray came in 2006, when KKR listed a €5bn vehicle in Amsterdam. Within two years it had lost more than half its value. Blackstone took a different approach in 2007, listing the management company rather than individual funds. Others followed—Apollo, Carlyle, KKR again—before the financial crisis soured appetite. Between 2007 and 2019, public PE stocks disappointed. Blackstone’s annualised return of 1.7% looked feeble beside the S&P 500’s 5.6%.
Momentum revived after 2019. EQT, a Swedish manager, floated with a model that distributed all management fees and part of performance fees to shareholders. The structure reassured investors and lifted valuations across the sector. Bridgepoint in London and TPG in Texas joined the wave. CVC and General Atlantic are preparing their own floats. Going public has become respectable again.
Why do firms list? The incentives are straightforward for general partners. An IPO transforms illiquid partnership stakes into liquid wealth. Stephen Schwarzman’s holdings in Blackstone were worth $7.5bn at float. Proceeds provide permanent capital to expand into new asset classes or geographies. Listed shares act as currency for acquisitions. A public listing boosts brand visibility, which helps when raising funds. Stock-based compensation schemes also make it easier to recruit and retain talent.
The gains for limited partners are less obvious. Stronger balance sheets may allow managers to diversify, and global platforms can offer broader investment opportunities. Yet evidence suggests public ownership alters incentives. Public markets reward stable fee income far more than volatile performance fees. The result is pressure to raise ever-larger funds, even if returns decline. Larger fund size correlates with weaker performance.
Transparency has costs, too. Disclosure of pay packets attracts scrutiny, and regulators may become more attentive. Germany, for example, has considered restrictions on private equity in healthcare. Quarterly earnings cycles impose pressures to deliver short-term results. Dividends channel fees away from staff, possibly diluting the performance culture that underpins the industry.
The trade-offs are stark. Founders gain liquidity and prestige, as well as permanence. Investors risk diluted returns and a pivot in focus towards stock-market optics. Warburg Pincus, which has stayed private, has consistently exceeded fundraising targets by concentrating on returns. Blackstone, by contrast, has become the world’s biggest alternative-asset manager, but at the cost of sprawling diversification.
For Team Ventures, the lessons are twofold. Going public would grant capital and credibility in a country where financial markets are shallow. Yet the record abroad shows scale and permanence may come at the expense of performance. Nepal’s small bourse, thinly traded and prone to volatility, will magnify those tensions.
NEPSE will welcome the fanfare of a new listing. But in private equity, as in mountaineering, planting a flag is easier than staying on top. ■
This story has been updated
