COATUE East Meet West Deck

102 Pages on Public Markets every investor should read

My highlights 🧵

1/ Tech Trends - higher returns & volatility
2/ Change in Stock Leadership - hard to stay on top
...
10/ The AI Flywheel
11/ Long the $USA 1/ Tech Trends - higher returns but more volatility and drawdowns

🚨 Private credit helped build a boom. Now it’s creating a mess.

Distress is spiking across the middle market, but not the kind we’re used to…

More firms are failing by accident than by design. And many lenders? They’re learning workouts in real time.

SCP CEO Lawrence Perkins breaks it all down on Bloomberg’s FICC Focus.

Here are my insights that every operator, sponsor, and creditor should know 🧵 1) Rise of “Distressed-by-Accident” Cases

Perkins observes a growing cohort of workouts he calls “distressed by accident." These are situations where overly aggressive financing (often from private lenders) unintentionally pushes a company into trouble, rather than a planned restructuring.

In his words, he’s seeing “more ‘distressed by accident’ lenders these days, courtesy of the private credit boom, than the ‘distressed on purpose’ ilk.” For restructuring professionals, the implication is clear: sponsors and advisors must monitor covenant-heavy deals closely.

Even healthy companies can suddenly trigger defaults, so early warning signs must prompt prompt action. In practice, this means conducting stress tests and engaging lenders before a crisis spirals out of control.

Apollo’s $800bn Credit Revolution: How to Turn Cheap Liabilities into a Global Origination Machine—and Why It Matters for Every Portfolio in the World

Wall Street’s usual private-equity tale ends with a splashy IPO.

Apollo Global Management has written a different sequel

It has turned itself into the world’s most sophisticated credit factory, originating more than $250bn of debt every year and warehousing much of it on its own $330bn insurance balance sheet.

John Zito—once a credit hedge-fund trader, now Apollo’s Co-President—recently unpacked that evolution on the Invest like the Best podcast.

1) From Hedge‑Fund Desk to $800bn Platform
2) Why the Athene Merger Changes the Game
3) Rewriting the Rules for Investment‑Grade Borrowers
4) The Origination Flywheel in Practice: Atlas and Beyond
5) Carvana: A Creditor Co-op That Rewrote the Playbook
6) The Cultural Operating System: “Thumbs, Not Fingers”
7) What the Model Means for Ordinary Investors
8) Where the Capital Will Flow Next: AI Infrastructure and Beyond
9) Hertz, Re-Examined: An Inside-Out Playbook 1. From Hedge‑Fund Desk to $800bn Platform

When Zito started trading in the early 2000s, bank loans did not even have tickers; they sat inert on commercial‑bank balance sheets. Credit default swaps (CDS) were a novelty, and a $1bn hedge fund seemed vast.

Two decades later the liquid loan market surpasses $500bn in annual issuance, and Apollo by itself manages almost that amount across liquid, illiquid, and captive insurance pools.

The through‑line is scale. A traditional asset manager invests a client’s money and charges a fee. Apollo still does that, but after its 2022 merger with retirement-services giant Athene, it now directly manages—and takes first-loss investment risk on—roughly $330bn of long-dated insurance float.

That capital ultimately belongs to annuity holders, yet the assets and equity cushion sit on Apollo’s consolidated balance sheet, giving the firm “skin in the game” on every coupon and principal payment it earns.

That structure reshapes incentives inside the firm. Instead of asking each desk to maximise its stand-alone carry, senior leadership asks a simpler question: Where does this asset live best along our “good-better-best” continuum of balance sheets?

A 30-year senior-secured loan on a hyperscale data-center campus might drop straight into Athene; a five-year, second-lien term loan backing a private-equity carve-out could slot into the Hybrid Value fund; an opportunistic block of stressed airline bonds might sit in the liquid-credit sleeve Zito once ran.

Because carry, fees, and principal co-invest all flow back to the same P&L, originators focus on total-firm economics rather than turf defence—“every asset has a natural home, so nobody is swinging a single hammer hoping everything looks like a nail.”

Bain Private Equity Midyear Report 2025

The cracks are starting to show

1) Global buyout deal value
2) Global buyout-backed exit value, by channel ($B)
3) Median buyout DPI, by vintage year
4) Global buyout capital raised ($B)
5) Ratio of capital sought to funds closed in year

Thread 🧵 1) Global buyout deal value, by region ($B)

While deal value was the highest since the second quarter of 2022, having been boosted by a few large transactions, such as Sycamore Partners’ $23.7 billion purchase of Walgreens Boots Alliance, deal count is still at very low levels - less than 50% from 2021 levels

Everything you need to know before starting your IB/PE job - 3,000 words of (very detailed) advice

Every day, ask yourself: "Am I being the best analyst / if they had to fire all analysts but one would they keep me? What can I do differently to become that analyst/associate?"

Even if you are already working, I hope you can find something that will save you some time.

1) Working efficiently
2) Communicating effectively
3) Being professional
4) Balancing work with personal life 1) Working efficiently

Part 1

DECODING GP STAKES

Is GP stakes investing the next frontier in private equity? Sean Ward and Blue Owl Capital are redefining long-term growth with permanent capital.

Sean Ward’s path to Blue Owl is far from ordinary. With a blend of Wall Street, PE, and legal experience, he’s leading Blue Owl’s GP Strategic Capital platform. They aim to forge lasting, value-driven partnerships with fund managers.

Here are my biggest takeaways from Sean’s conversation on Alt Goes Mainstream podcast (what a name!):

1) Blue Owl’s Early Entry into GP Stakes Investing
2) The Minority Investment Model
3) Sources of Return in GP Stakes Investing
4) What It Takes to Succeed in GP Stakes Investing
5) Targeting the Middle Market for Long-Term Growth
6) GP Stake Ecosystem in Private Market
7) Power of Permanent Capital in Securing Future Success 1) Blue Owl’s Early Entry into GP Stakes Investing

Blue Owl’s entry into GP stakes investing was a pivotal moment in the industry. Sean Ward's career took an unexpected turn after his time as a lawyer at Lehman Brothers during its 2008 bankruptcy. He transitioned into a hybrid legal-business role.

Ultimately, he helped spin out Lehman’s investment management division. This led to the creation of Newberger Berman. This evolution eventually turned into Blue Owl’s successful GP stakes platform.

In the early days, the firm set a modest goal of raising $300 million. However, their first fund ended up raising $1.3 billion. Over time, Blue Owl’s latest fund raised nearly $13 billion. The firm now holds 90% market share in large transactions.

The journey wasn’t without challenges. Fundraising was difficult, and convincing General Partners (GPs) to sell stakes in their firms was tough. GPs feared that selling a part of their business might make them seem misaligned with investors.

As time passed, GP stakes investing gained more acceptance. This shift was especially seen among larger firms. They recognized that external capital was essential for funding growth. GP stakes investing is now seen as a necessary tool for scaling up.

Buffett: "Big drawdowns are a price to pay for superior long-term investment returns"

@mjmauboussin latest paper analyses drawdowns and the art of making money in these periods

Thread🧵
1) Average Drawdown - 85% / 2.5 years
2) Drawdown Duration and Recoveries Stats
3) Buy the 95% drawdown
4) Even God Would Get Fired
5) Case Study 1: NVIDIA
6) Case Study 2: Foot Locker
7) What To Look For at the Bottom 1) Average Drawdown - 80%

Crazy stat by looking at the overall market.

What is even more interesting is that even the best businesses are not immune to large drawdowns

If we look at Apple, Microsoft, NVIDIA, Alphabet, Amazon, and ExxonMobi, the average maximum drawdown for the stocks of these 6 companies was 80.3 percent, similar to the average of the full sample

Wall Street lives quarter‑to‑quarter

Sir Chris Hohn of The  Children’s Investment Fund (TCI) underwrites to 2040

That patience has minted a $60 billion titan whose winners outlive entire market cycles—and whose performance fees bankroll one of the world’s largest child‑health and climate charities.

Here’s how: time arbitrage, moat‑first screening, and a no‑bureaucracy culture that lets ideas age like wine.

Below, seven longevity lessons from his interview with NBIM’s Nicolai Tangen on the ‘In Good Company’ podcast—from holding Moody’s through crisis to re‑entering at triple what it bought it for —showing why slow money can still beat fast crowds.

1) TCI: Building a $60 Billion Giant with Eight People
2) Chris Hohn’s Checklist for Fortress Businesses
3) Mental Models That Compound Capital
4) Why Moody’s Looked Unstoppable (and what it teaches about price vs. profit)
5) The Activist Years – Fighting, Winning, Adapting
6) Wirecard & Safran: Holding Through Chaos
7) Hard Lessons & Higher Purpose 1) TCI: Building a $60 Billion Giant with Eight People

In 2003 Chris Hohn quit a well‑paid hedge‑fund seat to start TCI with roughly $500 million. Today assets hover near $60 billion, yet the investment team still fits around a conference table—seven to eight analysts and partners.

Indeed, a notable firm alum and ex-partner is Rishi Sunak - United Kingdom's previous Prime Minister

Hohn copied a private‑equity mindset into public markets. While a typical mutual fund holds hundreds of names for twelve months or less, TCI owns ten to fifteen positions for as long as a decade. That patience is not laziness; it is the firm’s first structural edge. Markets seldom price what happens after year three. Hohn is happy to wait until year eight.

Culture protects the edge. He argues great analysts will not tolerate bureaucracy or politics. Keep the head‑count tiny, force every idea to withstand direct debate, and let trust replace process check‑lists. Above ten professionals, he says, the cohesion breaks down.

MEGA-FUND PRIVATE EQUITY RETURNS

We hear it all the time, Mega-Funds are trying to maximize capital aggregation vs. returns

What do the numbers actually say?

A thread on the returns of:
1) Blackstone - Bad
2) KKR - Bad
3) H&F - Mid
4) Silver Lake - Mid
5) Thoma Bravo - Mixed
6) Permira - Mixed
7) Warburg Pincus - Good
8) Concluding Thoughts 1) Blackstone

2015 Vintage: 0.85x DPI - marked at 12% IRR

2019 Vintage: 0.18x DPI - marked at 9% IRR

This is, obviously, bad.

It has been 10 years since the 2015 vintage and LPs are yet to get their entire contributions back. The 2019 vintage is a bit early in their lifecycle, but seems to be doing even worse, and it is quite possible this fund includes some very high-multiple deals from Covid.

I guess you can't get fired for giving your money to Blackstone, but this is rough

On-Cycle PE Recruiting is Paradise

Sooo good

1/n 2/n

David Senra has studied 400+ biographies of the world’s greatest builders, including Jobs, Dyson, Chanel, Graves, Walton, and uncovered the same characteristic: Obsession.

On ILTB, Senra shares the clearest blueprint yet for how to build something that lasts. Here are the main points he talked about:
1) Focus
2) Compound
3) Simplicity
4) Obsession
5) Grit
6) Talent
7) Consistency 1) Focus
Senra says if you distill 400 biographies of iconic founders into one word, it’s “focus.” Real focus: it’s a long, painful, monastic obsession with a single idea.

James Dyson worked 14 years on 5,127 vacuum prototypes before launching. Steve Jobs spent every Wednesday in 3-hour marketing meetings reviewing one ad at a time.

Coco Chanel stayed locked into her aesthetic vision for half a century. Todd Graves built a Raising Cane's chicken finger empire without ever adding a salad to the menu.

While the rest of the world is switching tabs and chasing investors’ money, the best founders tune everything out and run the same play.

Thoma Bravo, one of the most prolific software investors in private equity, has built a reputation for taking legacy software firms and transforming them into modern, high-margin platforms.

Its carveout of Dynatrace is a standout example — a complex transaction that required not just operational chops but true conviction in a long-term transformation.

Thoma Bravo Partner Chip Virnig and former Dynatrace CEO John Van Siclen break down:
1) Description & History of Dynatrace
2) Why Dynatrace Was a Fit for Thoma Bravo
3) The Carve-Out & Transformation Strategy
4) Adding Value Post-Acquisition
5) Lessons Learned & Reflections

Here are my notes 🧵 —> 1) Description & History of Dynatrace

Founded in 2005 (Linz, Austria); acquired by Compuware in 2011; spun out by Thoma Bravo (via Compuware buyout) in 2014. Merged with TB’s Keynote Systems in 2015. The IPO was completed in 2019.

A pioneer in application performance and digital observability. Dynatrace’s platform provides multicloud application monitoring (public cloud, SaaS, managed) to ensure enterprise software runs optimally. It effectively created the “Digital Performance Management” category.

Now headquartered in Waltham, MA (with R&D globally), Dynatrace has grown to a market cap near $15–16 billion. It reports well over $1 billion in annual cloud-based recurring revenue (from essentially zero at TB’s entry).

COREWEAVE IPO

The largest tech IPO since 2021, selling AI as a service, you must understand it.

1/ How does CoreWeave make money?
2/ Attractive Unit Economics?
3/ Revenue Profile / Concentration
4/ Capital Needs and Debt
5/ Ending Thoughts

A Thread 🧵 1/ How does CoreWeave make money?

They rent out GPUs and get paid per hour

"We generate revenue by selling access to our AI infrastructure and proprietary managed software and application services through our CoreWeave Cloud Platform.

Access to our platform, including compute, networking, managed software services, and application software services, is currently priced on a per GPU per hour basis.

Storage is sold separately on a per gigabyte per month basis."

Hamilton Lane published its annual 100+ pages market review

- Private markets vs public markets
- Deal valuation
- Primary buyout vs sponsor by sponsor trends
- Fundraising

A lot to dive in!

1/16 🧵

DPI by Vintage Year 2/ IRR by Vintage

1) Venture had such an amazing run in the early 2010s

2) Nat Resources really struggled for years

3) Public markets still outperformed a significant number of private markets asset classes. This said, comparing risk is really hard given the different nature of the asset classes

This is Alex Sacerdote.

He is the Founder of Whale Rock, a large-scale single-manager hedge fund focused on TMT.

On Monday, he revealed how he picks stocks and build an investment firm.

Here are 8 key lessons:

1) The S-Curve Framework
2) Why Great Leaders Create Lasting S-Curves
3) How To Use the S-Curve to Short Stocks
4) Why AI is the Biggest S-Curve of the Century
5) Private Market Investing
6) View on Crypto & Stablecoin
7) Handling Market Volatility
8) Portfolio Management Approach

A (Long) Thread 🧵 1) The S-Curve Framework

Every large technology goes through an S-curve. It begins slowly in the beginning. The product is too expensive, complex, or doesn't have supporting infrastructure. Most investors have not seen its potential yet. As it develops, prices drop, and the technology improves. As a result, demand explodes. Adoption can jump from 1% to 50% in just a few years. As the company matures, growth slows, competition increases, and profits shrink.

Alex’s strategy is all about finding stocks right before this breakout moment: that is, the inflection point of the S-Curve. That’s when earnings take off and the biggest returns happen. His approach focuses on three key factors:

(i) Spot S-Curves early before the market catches on.

(ii) Find companies with a strong moat so they don’t get crushed by competitors.

(iii) Look for hidden earnings growth — stocks that look expensive now but will be cheap based on future profits. This is exactly what Stephen Mandel or every other Tiger Cub founder would preach.

This strategy brought Whale Rock to Nvidia early in 2023, just after ChatGPT launched. Most investors thought Nvidia was overpriced. Whale Rock realized that AI demand was going to surge and Nvidia's future earnings would be significantly bigger than expected. They knew the stock was actually undervalued. Now Nvidia dominates AI chips.

Back in 2019-2020, Whale Rock thought Tesla was a great S-Curve investment. EV adoption was really starting to take off. When Elon Musk dropped the Model 3 price to $40,000, demand surged. Tesla had a strong brand, and was way ahead of the competition. Even though most investors thought the stock was too expensive, Whale Rock looked at its forward earnings and figured they were only paying 4x future earnings.

When EV adoption in the U.S. reached 10%, growth slowed down faster than they expected. This made Tesla's high price hard to justify. Even with Tesla in a top spot, the S-Curve momentum faded. So Whale Rock sold their shares. They locked in gains before the trend flattened out.

A $7.1B Investment, Huge Debt, and Big Risks

Apax Partners thought they had a winning bet with Cengage Learning. But after a series of missteps, the investment turned into a high-stakes game of debt management and survival. While $1.8B in equity might be at risk, Apax didn’t walk away empty-handed.

Here’s how the deal played out: a mix of high rewards, high risks, and lessons on using leverage:
1) A High-Stakes Bet on Education
2) The Buyout Structure
3) The Fall: Market Disruption & Digital Lag
4) Apax’s Next Move: Turnaround & Buying the Debt
5) Bankruptcy & the Aftermath
6) Lessons 1) A High-Stakes Bet on Education

In 2007, Apax Partners with Ontario Municipal Employees Retirement System (OMERS) together bought Cengage Learning for $7.75B, financing it with $5.6B in debt.

At the time, Cengage was a giant in the college publishing world. It was the second-largest in the U.S., selling both print and digital educational materials. The higher-ed publishing market was dominated by Pearson, Cengage, and McGraw-Hill. All of them controlled 70%+ of the industry.

Apax saw a huge opportunity. Demand for educational materials was rising, and the shift to digital learning promised future growth. They believed textbook sales would stay steady and largely unaffected by economic cycles.

But there was a problem. 75% of Cengage’s revenue came from printed textbooks, which held a 20% market share. Apax was betting big on print while the industry was on the verge of change.

Today, Bloomberg published a very interesting article about big law firm, Latham

They share its revenue, income per partners, and a few other details. With some simple math and a few assumptions, we can find out some really interesting stats

1) Revenue per hour
2) Net Income Margin
3) Latham Valuation (~$50 billions)

A Thread🧵 1) Revenue per hour

Nothing new under the sun here, but still interesting to put together revenue and numbers of billing lawyers

Assuming 2,000 billed per year, the average hourly revenue is of $1,000

While this is much lower than what Latham charges per hour to its clients, this is brought down to non-client work

Another stat interesting to think about is the revenue per lawyer

For reference, $2 million / lawyers is in line with revenue / employee for big tech

Of course, the comparison is not fair, as we excluding non-lawyers employees, but this is still quite puzzling

We always talk about how phenomenal big tech businesses are in terms of being able to leverage economy of scale and how you can never achieve truly large scale selling "time"

Well, this is the proof you can

This is Kelly Granat.

The Co-CIO at Lone Pine Capital, one of the most storied and successful hedge funds in history.

She just sat down today with ILTB and revealed how to pick stocks and lead an investment firm.

Here are 7 key insights:

1) What Every Great Business Has in Common
2) Lone Pine’s Biggest Investing Mistake & How They Fixed It
3) The Short-Termism Epidemic
4) Strategies & Opinions on AI
5) Finding Value Beyond Tech
6) Balancing Fundamental & Macro Awareness
7) The Investing Mindset That Separates the Best from the Rest

A (Long) Thread 🧵 1) What Every Great Business Has in Common

Kelly believes the best investments have a competitive moat, strong business models, and outstanding leaders. A great company has a desirable product, scales efficiently, and can continue to grow for years with minimal risk. However, paying too much for a company can make it a negative investment, even if it is good. Valuation and timing are crucial.

One major signal is a leadership change. If a good CEO takes over a company that has a strong base but isn't doing well, the upside can be massive. Ulta Beauty is a good example. It had a fundamentally strong business, but its marketing and culture were bad. When Mary Dillon, who is experienced in consumer goods, became CEO, she changed the company's strategy and image. This unlocked huge value. Lone Pine kept an eye on her career and invested early because they knew she could fix the problems.

The best turnaround investments happen when a company’s biggest weakness aligns perfectly with a new leader’s expertise. Some businesses, however, don’t need superstar leadership to succeed. Their models are so strong that they compound naturally over time. Visa and Mastercard are great examples. Their revenue grows as global transactions increase, and their business model is nearly impossible to disrupt. Lone Pine invested in them early but should have held longer. For these companies, leadership matters less than buying at the right price. Great investing is about balancing leadership-driven turnarounds with long-term compounders—and knowing when the market is mispricing both.

Shrinking private equity, alpha in private markets, and Sycamore - Walgreen Buyout

Exciting week in private equity and wanted to share some thoughts on -->

1) FT Article on Private equity shrinking for the first time in decades
2) “Buy, Slightly Tweak, Sell” is the new “Buy, fix, sell”
3) What is your Alpha source in the Buy part?
4) Outperformance in complexity
5) Thoughts on Sycamore - Walgreen Buyout 1)The Key Facts - Declining Industry

Let’s start by reviewing the key fact reported by the FT article published on March 5th.

1)Assets are declining, why that’s a big deal

“Buyout firms managed $4.7tn in assets as of June last year — down about 2 per cent from 2023”

while most investors would not worry for such a most decline, this is a big deal because this is the first decline in 20 years.

Even during the Great Financial Crisis (!!), private equity AUM increased. Things are rough today.

2)Distributions are low

When a private equity firm sells a portfolio company, they distribute proceeds to the investor of the fund that owned the company. These proceeds are called distributions.

Today, distributions as % of NAV are the lowest in the decade at 11% (this compares to an average of 29% from 2014 to 2017).

This means Private Equity firms are really struggling to sell their companies, or believe the market is not appreciating how great of an asset they are trying to rid off :)

Low distribution affects fundraising (hard to ask an LP more money for a new fund when the previous funds are not giving back cash)

3)Fees are falling

What do you think happens to fees when fundraising is hard, and distributions are low? You guessed it, you lower fees trying to highlight to LPs how great of a chance this is to put dollars at work at reduced fees.

In addition, the article highlights two trends that incrementally put pressure on fees: (i) co-invest which is usually done without any fees, and (ii) evergreen funds which generally have lower fees.

Overall, things are tough, so I wanted to share a few thoughts on what is going on.

Big-Law Firm Weil just published a 2024 Private Equity Report on "Going-Private" which includes everything you need to know 👇

1) Take Private Activity
2) Sector and Size Concentration
3) One-Step Merger vs. Tender Offer
4) PIPE Market Activity and Drivers
5) Transactions with Go-Shop Provisions

A Thread 🧵 1) Take Private Activity

While this year’s survey includes slightly more surveyed transactions than last year (35 in 2024 and 31 in 2023), aggregate deal value of U.S. sponsor-backed going private transactions rose by approximately 25% - due, at least in part, to a rise in “mega deals”

ELLIOTT - PHILLIPS $2.5B ACTIVIST CAMPAIGN

Today, Elliott sent a second letter to Phillips board disclosing its $2.5B investment in the stock and asking for change. 

What is their thesis and how do they plan to create $30B of equity value:

1) Phillips 66 Overview
2) Today's Inefficient Structure 
3) Refining and Midstream do not fit together
4) Lagging profitability symptom of dysfunction
5) Damaged Management Credibility
6) Value Creation / Valuation

A Long Thread 🧵
1/n Executive Summary

Phillips is falling short of its potential.

A streamlined Phillips would unlock significant value and create a stronger company

The business includes 4 segments: refining, marketing & specialties, midstream, and chemicals

Today, the stock is a ~$120 and Elliott thinks it should achieve ~$200