When entering private markets, Capital Group partnered with KKR rather than building a team internally. They reasoned that building from scratch would mean "practicing on your client's money" and distracting their core team. This decision prioritized delivering a proven solution over capturing 100% of the economic upside.

Ops teams structured as internal consulting groups have an incentive to maximize billable hours. This can lead them to 'find projects' or do a manager's job, which props up underperformers and masks fundamental problems from the investment team, who ultimately decides if that person should keep their job.

The GFC was a major catalyst for the growth of PE ops. As portfolio companies struggled, Limited Partners (LPs) grew concerned that traditional dealmakers lacked the skills to manage businesses through a crisis. This LP pressure forced firms to professionalize and build dedicated operations teams.

The number of operating partners in PE has tripled, but this can be counterproductive. Flooding a portfolio company with functional experts often leads to uncoordinated efforts and confuses management teams. The most effective approach is often more targeted, with a principle that sometimes the best action is no action at all.

To maximize value creation, young private equity firm Teopo Capital made a strategic decision to hire a full-time operating partner dedicated to portfolio companies before building out a fundraising team. This signals a deep commitment to hands-on operational improvement as their core strategy.

The consulting giant is shifting its business model from pure advisory work (fee-for-service) to an outcomes-based approach. McKinsey co-creates a business case with the client and contractually underwrites the results, aligning its incentives directly with client success.

The current trend of small and mid-size PE firms building large, siloed ops teams that mimic mega-funds is unsustainable. The speakers predict a market correction toward smaller, more effective, and more deeply integrated operating teams as firms and CEOs realize the current model is often inefficient.

Early PE was a "cottage industry" focused on finance. Now, with thousands of firms, the leading approach is hands-on business building and operational improvement, marking a fundamental shift in the industry's nature and a key to long-term success.

As PE ops became popular, a contrarian fundraising pitch emerged. Some firms argued against having an internal ops team, claiming their presence signals a lack of trust in the portfolio company's CEO and can hinder productivity. This positioned them as more 'hands-off' and management-friendly investors.