EP269: The $350M 30-Year Fund Model
Timestamps are as accurate as they can be but may be slightly off. We encourage you to listen to the full context.
Podcast Summary
In this enlightening conversation, Brent Beshore, founder and CEO of Permanent Equity, reveals a revolutionary approach to private equity that challenges industry orthodoxy. (00:00) Managing roughly $350 million across two long-duration funds, Permanent Equity operates with 30-year fund timelines, no management fees, and zero transaction debt - creating a model that prioritizes compounding and alignment over quick exits. (01:12) Beshore explains how this patient capital approach allowed his aerospace business to grow 7x during COVID while competitors struggled with debt obligations. (02:41) The episode explores how permanent capital enables better decision-making, stronger relationships with operators, and the ability to capitalize on market downturns rather than being constrained by them.
- Core Theme: How permanent capital and alignment-focused investing creates superior long-term outcomes by removing traditional private equity constraints like debt, short timelines, and misaligned incentives.
Speakers
Brent Beshore
Brent Beshore is the founder and CEO of Permanent Equity, managing approximately $350 million in permanent capital with a revolutionary 30-year fund structure. He began investing in 2010 with his first SBA-financed acquisition and has built a track record of buying and holding businesses for the long term without traditional private equity constraints. Beshore has developed an innovative fee structure where Permanent Equity charges no management fees or reimbursements, aligning compensation entirely with investor returns through cash flow distributions.
Key Takeaways
Embrace Permanent Capital for Exponential Growth
Beshore demonstrates how 30-year fund timelines enable businesses to compound without interruption. (01:39) His aerospace business grew 7x during COVID because they had no debt obligations forcing fire sales or bank negotiations. Instead, they reinvested in talent, new ERP systems, and acquired assets at discounted prices while competitors were distracted by debt servicing. This patient capital approach allows businesses to make decisions based on long-term value creation rather than short-term financial engineering.
Eliminate Debt to Maximize Cyclical Opportunities
Traditional private equity's reliance on leverage becomes a liability during market downturns. (07:27) Beshore argues that for small to mid-market businesses ($5-15M free cash flow), debt creates unnecessary risk without proportional upside. (08:34) When the aerospace industry dropped 70%, debt-free Permanent Equity could invest aggressively while leveraged competitors focused on survival, allowing them to "make ten years of progress in eighteen months."
Align Incentives Through Zero Management Fees
Permanent Equity charges no management fees, reimbursements, or any cash from LPs except through profit sharing. (04:39) This structure forces the team to "eat only when investors eat," creating true alignment. (05:16) Team members receive quarterly cash distributions based on portfolio performance rather than waiting for long-dated carry, providing immediate feedback on decisions and maintaining high motivation throughout the investment period.
Prioritize Cultural Fit Over Maximum Price
The "cell phone test" - whether you're excited or cringing when a portfolio CEO calls - determines investment success. (18:24) Beshore seeks earnest, self-aware operators who can take feedback and maintain enjoyable relationships even during difficult conversations. (21:42) Working with difficult personalities creates friction that exponentially slows progress, while great relationships enable accelerated decision-making and execution.
Focus on Quality Over Cheapness for Sustainable Returns
Early in his career, Beshore focused too heavily on cheap assets rather than quality businesses. (30:17) He learned that paying 60% more (from 4x to 6.5x multiples) often yields businesses that are double the quality or better. (31:30) High-margin businesses that get paid quickly are more important to their customers, creating sustainable competitive advantages compared to commodity businesses competing solely on price.
Statistics & Facts
- Permanent Equity manages roughly $350 million across two long-duration funds with 30-year timelines, raised $50 million in 2017 and $300 million in 2019. (00:00) This represents a dramatic departure from traditional private equity fund structures.
- Their aerospace business grew approximately 7x larger during COVID compared to pre-pandemic levels. (02:41) This growth occurred while the airline market declined 70%, demonstrating the power of debt-free operations during cyclical downturns.
- 50% of Permanent Equity's investors are institutions who commit capital for the full 30-year fund life. (03:27) This institutional backing validates the permanent capital model among sophisticated investors.
