Why Celebrities Are Interested in the Unglamorous World of Private Equity

This article is part of CNN Business’s Nightcap newsletter. Sign up for free to receive it in your inbox. here.

New York
CNN business
—

Kim Kardashian. You know her because she’s a reality TV and social media star, an entrepreneur, and an up-and-coming lawyer. She’s the whole brand. And she, she becomes an increasingly powerful force in the business.

Now she’s about to enter the secretive, unglamorous world of private equity, aka the “vulture capitalist.”

Here is the contract: Kim K is partnering with Jay SammonsFormer Carlyle Group executive . Her mother, Kris Jenner, is also a partner.

easy explanation: Private equity can involve a wide variety of investments, but the majority of the industry is concerned with “leveraged buyouts” or LBOs. It will run better and then sell or publish it. In about 20% of cases, the target company will go bankrupt within 10 years. Toys “R” Us).

For ordinary employees, being acquired by a PE firm usually doesn’t bode well because it can mean layoffs and other cuts.

According to Jeffrey Hook, a professor at Johns Hopkins University Carey School of Business, private equity has been around for more than 40 years, in part because high fees are prohibitive for fund managers. because it is attractive to

“It has survived by being secretive and perpetuating the myth that it offers investors great returns, but it fundamentally does not.”

PE companies are often seen as vultures, swooping in to feast on dying entities. But recently report from mother jonesa large part of modern PE work is “not to end sick companies, but to sneak up on and eradicate healthy ones.”

Oh, and the general public doesn’t really have access to these investments. is reserved for hmm deep pockets.

Back to Kim…

There’s a lot we don’t know about the new fund. It has not yet started fundraising and the founders have not specified what kind of investment they would like to make.

At first glance, PE may seem an odd fit for someone as powerful and attractive as Kim Kardashian. Kim Kardashian certainly doesn’t have to hunt around to buy up distressed assets and extract their value. According to Forbes, the success of Skims, her hugely successful apparel business, and KKW her line of makeup made her a millionaire.

But but all PE involves seeking out companies in distress. Based on what Kardashian has said so far, it looks like SKKY Partners will lean towards growth equity. Part of that Kardashian halo effect.

this is hers told the WSJ about his new venture On Wednesday: “The exciting part is sitting with these founders and figuring out what their dreams are. Rather than changing who they are in their DNA, just support And I want to take them to another level.”

…which doesn’t sound like the kind of scavenger PE is known for.

bottom line

PE is hot right now. Much like the celebrity-fueled SPAC craze of 2020, this is a risky type of investment. But even if every trade fails, you’re still collecting hefty fees from well-funded investors.

This is part of the reason why so many celebrities, including LeBron James, Magic Johnson, Serena Williams, and Will Smith, are pouring their money into physical education.

According to Hook, a $500 million PE fund could result in $10 million in fixed costs per year, regardless of whether the fund is profitable.

“If I were a celebrity, I would jump in and start a private equity fund,” says Hook. “Nothing to lose… Investors pay a lot of money to manage their investments. How bad is that deal?

“We found the right person and we will never come back.”

Three-time Starbucks CEO Howard Schultz He says he has no plans for a fourth Take control. Last week, the company announced that Laxman Narasimhan, who recently ran British consumer goods giant Reckitt Bannister, will join Starbucks on Oct. 1 and formally take the reins in the spring. will remain on the Board of Directors of

Every year, somewhere between Labor Day and Halloween, when it’s still 800 degrees outside and everything is pumpkin flavored, the Apple gods descend from on high to distract us from their cursed reality. He will give you a lot of new gadgets for you.

So here it is, New iPhones and other technical stuff It was announced at the company’s decidedly sophisticated gadget launch.

First, the iPhone 14 (yes, it’s 14! They grow so fast). we didn’t see anything oh my god wow Features, but as in previous years, there are some welcome upgrades.

Apple Watch for outdoor enthusiasts. This is… this is actually what interests me. Apple is designed for anyone who lives (or wants to) in Colorado, is thinking of buying a Rivian, or likes to drink an IPA after a long day of trail running. announced a new high-end smartwatch.

satellite connection. I feel like this is late, but I’m glad it’s here:

Enjoying a nightcap? sign up All of this, plus other interesting things we love on the internet, fill our inbox every night. (OK, most nights — I believe we work four days a week here.)