Schloss: It's a very good time to be an LP. It's always a good time to be a GP. [Laughter] But in the good old days, private equity invested capital in three years, then it's back to raising the next fund. The next fund would be 1-1/2 to 2 times as big as the old fund, though the results of the prior fund wouldn't be apparent. Unless it blew up right away, the presumption was it's good. The GP says it's good. If the economy is going up, it is good, but it is on paper.

What's happened here: Money got invested over three years, and the world ended. Now it's five or six years later. The portfolio has been wrecked by a recession. The wrecks would be the overlevered companies where you can see precisely how the GPs have managed through the recession. You can see how many CEOs have changed, how these assets are marked because FASB 157 also came during the period.

Now not everyone can say they're in the top quartile anymore. Plus perhaps being in the top quartile is not what it used to be. If you're in the top quartile, that means you made 5%. We're not very happy with that. You go back, see who these people are, what they have done, what happened to the portfolio.

The cream just jumps out at you, because the best guys have taken adversity and made it into opportunity. Whether you're in that fund or not, it's obvious you need to be in it.

Some funds have just blown up. They're marked at 50 cents on the dollar. They probably don't want to be fundraising just now, so they're probably out of capital. They'll try and nurse that 50 cents and keep the firm together through all this. Then there's the middle. The middle is marked about 85 cents or $1.10, and there are a lot of those. You wait. The ball's 100% in the GP's court. The markets have opened up. Get us some money back so the GP can prove to all their LPs that it's a good fund. If they can't do that, they won't have a very good fundraise.

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