Collin Roche, Co-CEO and Managing Director of private equity firm GTCR, said private equity risk is now being priced in a more rational way.
This shift in pricing suggests a stabilization in how the industry assesses risk and reward. For firms like GTCR, the focus is moving away from relying on market inflation to drive returns and toward operational improvements.
Roche discussed the firm's approach during a Bloomberg interview on Thursday. He said that GTCR focuses on value creation rather than simply riding rising prices to achieve gains [1]. This strategy involves backing executive teams to drive strategic and operational improvements, which the firm believes justifies higher exit multiples [1].
To illustrate this model, Roche pointed to the firm's history with Worldpay. He said that the exit from Worldpay was worth multiple billions of dollars [1]. The multibillion-dollar return serves as an example of how operational growth, rather than market timing alone, can drive significant profit [1].
By prioritizing the fundamental health and growth of a company, GTCR aims to mitigate the volatility associated with broader market swings. Roche said the goal is to ensure that the value added during the holding period is what drives the final sale price [1].
“Private equity risk is now being priced in a more rational way”
The emphasis on 'rational' pricing and operational value creation reflects a broader trend in private equity as the era of cheap debt and rapid multiple expansion ends. By focusing on internal strategic improvements rather than market momentum, firms are attempting to insulate their portfolios from macroeconomic volatility and interest rate fluctuations.
