Dan Rasmussen

Very excited to announce that my new book The Humble Investor is available for pre-order! See below for links to bookstores...

Verdad: Japan cross-shareholdings are being unwound but the balance sheet unlock has yet to happen mailchi.mp/verdadcap/cash…

🎙️NEW PODCAST: Private Equity Unwind with Dan Rasmussen [@verdadcap], Founder and CIO at Verdad Advisors on the @PlanetMicroCap Podcast We discuss: - Why Dan calls 2018–2020 the "value apocalypse" - The reframe: from "when will this end" to "when does micro cap value work best" - Why crises spike illiquidity premiums and create value mismatches - His biggest regret: not backing up the truck on coal stocks 📺Watch: youtube.com/watch?v=SwMZHA… 🎧Listen: podcasts.apple.com/us/podcast/pri… 📝Blog: planetmicrocap.com/private-equity…

Too Small to Matter? Public microcaps are trading at massive discounts (Verdad) "Private equity is one of the most competitive, oversaturated investment strategies of all time, and the flood of money into the asset class has pushed valuations to crazy heights. "We believe investor neglect, not bad financial performance, has driven the wide valuation discounts in public microcaps."

Think 6x - 8x EBITDA for Resi HVAC is rich? 10x+ sound ludicrous? Competition for <$1M EBITDA assets like HVAC or Plumbing Co is intense Private Equity going further down market to chase assets as low as $500K Ind. Sponsors searching for deal #1 are also chasing deals at $500K WSJ published two articles 5 days apart highlights why there’s such intense interest More capital (demand) is flowing to the private markets chasing fewer quality assets (supply) = EBITDA multiples👆🏼

FT: "Google burned through cash in the second quarter for the first time since going public more than two decades ago as gargantuan AI infrastructure spending has transformed it from an asset-light business into a capital-intensive one. The company said free cash flow for the three months to the end of June turned to minus $5.9bn, much lower than analysts had expected, as it again upped its spending forecast for data centres and other AI hardware." As I warned in my December report on "GenAI & Productivity" (sageroadresearch.com/collections/re…), investors were underestimating the persistently problematic unit economics of AI. To quote @verdadcap: "I think what’s interesting about AI is that it’s the first tech innovation that’s capital intensive since fiber…The big tech companies have gone from having about a third of the capital intensity of US industrial companies to three times the capital intensity of your typical US industrial company. The Google search engine was basically free to build with no marginal cost. Every AI query is costing a massive amount of energy. It’s clearly a worse business model than came before." FT link: ft.com/content/b02f97…

Private-Equity Assets Stuck in ‘Zombie Funds’ Are at a Record High wsj.com/finance/invest…

"Private equity deals and microcap public equities have a lot in common. Most importantly, of course, is size. The average private equity deal had a market capitalization of around $130M in 2025, and microcaps by definition have market capitalizations of less than $400M. Microcaps also have similar levels of dispersionas individual private equity deals, meaning the theoretical potential for alpha generation should be comparable. But there’s one place where the difference couldn’t be starker: valuation." Via @verdadcap

Here's the credit stats across high yield, leveraged loans, and private credit leverage lines: Private credit leverage: 5-7x. Coverage: 1-2x. That's low single-B to CCC territory if you were wondering There's a reason why direct lending spreads are typically wider than their peers

KKR capital market assumptions has 10Y expected return for global equities at 6.1%, private equity at 11.6%! A pretty exciting opportunity!

Sponsors used to exit by selling mostly to other sponsors. Not suprisingly, strategic buyers have become the preferred route Source: Morningstar

Recording a #ProtectthePile Episode shortly with @verdadcap - should be a great conversation. Hit us with questions! @HedgeyeAM @Hedgeye @Hedgeye_ADDS @SamofAmerica @dsaleminvestor

"To Verdad founder Dan Rasmussen, this shows that private equity has become as mainstream as stock of blue chip International Businesses Machines Inc. Rasmussen, though, is no cheerleader. He believes private equity is “not appropriately sized” within portfolios. It’s too risky for major institutions like Harvard or pension funds that serve retirees to have such large allocations to private equity when it’s less than 5% of the size of the global public equity market:" bloomberg.com/opinion/articl…

Private equity is dead if the below rev/earnings growth is correct. Anecdotally, I haven’t seen growth close to this low but my focus has always been more growth oriented LMM/MM strategies.

Private-Equity Firms Are Sitting on a Nine-Year Backlog wsj.com/finance/invest…

.@verdadcap has the best paper on this (that I know of): verdadcap.com/archive/emergi…

Private equity generated an 11% return in 2008 while the S&P 500 fell 38%. When the entire global financial system was collapsing, private equity was somehow up double digits. That number alone should make any investor suspicious of the industry's core pitch: uncorrelated returns. Private equity funds hold no shorts, no hedges, no exotic diversifiers. They're long-only bets on companies, exposed to the same economy as public stocks. 📊 The alpha that disappeared Using Cambridge Associates data from 1994 to 2017, private equity outperformed its public market equivalent by 8.9% per year between 1994 and 2005. From 2005 onward, that alpha collapsed to 1.5% per year. As the industry's AUM grew past $3 trillion, generating real outperformance got dramatically harder. 🔍 The volatility that doesn't make sense The US Private Equity Index showed volatility of just 7.0%, compared to 13.1% for the S&P 500, and even below the 7.7% volatility of 10-year US Treasury bonds. A basket of private companies being calmer than government debt isn't a risk profile. It's what happens when a fund reports its own valuations once a quarter rather than trading in the market every day. 🏗️ The replication that gives it away Private equity returns can be closely replicated using a public index of small, cheap, and leveraged stocks. That replica portfolio tracks the US Private Equity Index almost exactly in cumulative performance. The only real difference is volatility: 1. Annual IRRs vs. S&P 500 (1994-2019): correlation of -0.15. This is the number private equity firms show investors, and on its own it looks like real diversification. 2. Annual public market equivalents vs. S&P 500: correlation jumps to 0.39 once returns are converted to a comparable, cash-flow-matched benchmark instead of self-reported IRRs. 3. Quarterly IRRs vs. S&P 500: correlation reaches 0.74, the least smoothed, most frequently marked version of the data available. 4. US 10-year Treasury bonds vs. S&P 500, for comparison: correlation of -0.47. Bonds deliver the negative correlation private equity claims, without needing quarterly reporting or self-marked valuations to get there. The less private equity's data gets massaged, the more it looks exactly like public equities. 💡 Where the story actually ends Private equity firms built a real business by identifying underpriced, mismanaged companies and improving them. That model generated genuine value for two decades. But it was also fueled by rising valuation multiples and falling interest rates, tailwinds that are largely spent. In 2018, 48% of all private equity exits were sales to other private equity firms, not IPOs, not strategic acquirers. That's not the "buy it, fix it, sell it" model working. That's funds trading assets among themselves. Full research: insights.finominal.com/research-priva… Access to Finominal Private Equity Index: finominal.com/custom-indices… @CliffordAsness @verdadcap @matt_levine

@__paleologo Can you share the syllabus?

Kent Daniel (kentdaniel.net) and I are teaching Quantitative Investments at Columbia this fall. It's a graduate course. If you're a student, enrollment is open. I think the course is 2x oversubscribed, despite the entrance exam (which was hard-ish). But I am sure there will be no-shows. I will share here what I can (that is compatible with the uni's policies). And yes, it's really cool and surreal to teach a course with the coauthor of the "momentum crashes" and the "characteristics vs covariances" papers.

Dan Rasmussen on what he calls the private equity consensus trade: ❝ Investors should ask a simple question: What would convince you to reduce your allocation to private equity? ⤵️

Thanks to @PFOInvestor, @scottwendy111, and @BarbellFactors for the finance book recommendations! Including those by @MeasureTwiceMNY and @verdadcap. Check out the full list here: summitward.com/learn/finance-… #Investing #Finance #PersonalFinance #StockMarket #BookRecommendations

~40% of private credit borrowers carry negative cash flow ouch (Source: Allianz)