In a recent post I mentioned that Gresham Private Equity is still trying to raise a new $600m fund. One reader commented on Gresham's unusual relationship with corporate giant, Wesfarmers:
Gresham model is not sustainable. Wesfarmers are under serious pressure from equity analysts to stop backing the PE fund (or ideally divest the entire Gresham asset) . . . Gresham may not like it, but the PE team may have to spin out to survive.
It looks like he knew what he was talking about. Wesfarmers reported their financial results yesterday and this is what Merrill Lynch analyst David Errington had to say:
The one aspect of Wesfarmers that we find totally unacceptable is its foray into private equity investments via Gresham Partners. This year Wesfarmers lost $57m via its investments in Gresham . . . .
Why a large and respected company like Wesfarmers, that not long ago paid $19bn for the underperforming Coles businesses, is still undertaking investments in private equity ventures is totally beyond us.
We just don't understand it . . . and disagree with the strategy to continue investments. The sooner Wesfarmers exits from private equity investments in partnership with Gresham Partners, the better we believe it will be for shareholders.
Ouch.
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