Young Lee has backed private equity funds at Abbott Capital for most of its 40-year history. His baseline view on the industry's biggest fundraising signal: "Almost always a bigger fund size is bad."
Most GPs pitch a bigger fund as proof of demand. Jack Purcell, whose Ridgemont Equity Partners just closed its largest fund yet at $4 billion, sat across from the LP who helped him raise it and let Lee make the opposite case first.
"Almost always a bigger fund size is bad. That's just how LPs think about it."
Lee is a Managing Director at Abbott Capital Management; Purcell is a Managing Partner at Ridgemont Equity Partners, the Charlotte-based mid-market firm that spun out of Bank of America in 2010.
I listened to the full episode so you can skip it. 43 minutes of audio, 15 minutes of reading.
Here are the 10 lessons that matter.
👤 Guests: Young Lee, Managing Director at Abbott Capital Management, a fund-of-funds investor marking its 40th year; and Jack Purcell, Managing Partner at Ridgemont Equity Partners, the Charlotte-based mid-market firm marking its 33rd year
🎙️ Host: Chris Witkowsky, Global Editor, Investor Intelligence at PEI Group, who hosts the Commitment Issues series inside Private Equity Spotlight
📰 Published: 10 September 2026 on YouTube (Private Equity Spotlight)
🔴 YouTube | 🟣 Apple Podcasts | 🔗 Show notes | ⏱️ 43 min | ✅ Time saved: 28 min
Key Takeaways
From an LP's chair, a bigger fund is almost always a warning sign, not a compliment
What Abbott actually screens for is whether a GP is staying in its strategy, not whether it's raising more capital
Scale genuinely helps GPs execute, but it also compresses the spread of outcomes — Abbott's own data shows mid-market returns carry more upside and more downside than large-cap, which flattens out as funds grow
Operating partners are "smoke and mirrors" about half the time, in Lee's account — the same title, wildly different effectiveness, and an LP has almost no way to tell which from the outside
The math of private equity changed and some junior partners haven't updated their models — one firm's junior staff were still underwriting 3.5x exits in a market where 2.5x was the realistic outcome
On marking the portfolio, Purcell would rather be caught undervalued than overvalued — his own data shows up to 45% of a deal's eventual gain can be missing from the books two quarters before exit
Ridgemont's LP base went from all-domestic to genuinely global on its most recent fund, deliberately, after 17 years as a single-LP captive of Bank of America
Secondary sales used to be an access play into oversubscribed funds; today the secondary market is deep enough that nobody needs to use it that way anymore
Abbott underwrites every re-up as if it were a brand-new investment, because the people running a fund — not the systems and process around them — are what it's actually betting on
Succession planning is where private equity firms most often fail, and Abbott has walked away from strong track records rather than back a GP with no real plan for who comes next
1. A Bigger Fund Is a Red Flag
Host Chris Witkowsky opened Private Equity Spotlight's Commitment Issues series on the industry's perennial subject — fundraising — by asking Lee how an LP actually reacts to a bigger fund size.
"Almost always a bigger fund size is bad. That's just how LPs think about it."
Lee's baseline preference is a manager that stays exactly the same size and keeps delivering. "We would love the same thing every time — people still being happy even though they're making the same amount of money"
What Abbott is actually screening for is strategy drift, not fund size itself. "What we're looking for really is: are they staying in their strategy? So even if they're raising more, are they moving up market?"
A firm that raises more but does the same number of deals at bigger size is the harder case to underwrite, because it signals a shift into a different part of the market where old sourcing and diligence habits may no longer apply — Lee's example is a small business hiring its first real CFO, a milestone that changes what an investor's playbook needs to look like next
There's no fixed threshold, but a rough signal exists. A GP raising 100% more than its prior fund and still being oversubscribed reads as strength; a GP raising only 25-50% more, or struggling to explain why it isn't raising more, invites more questions
Purcell's counter is that some growth is healthy — for the firm's own people, not just its investors. "I do think some level of growth is a sign of progress — not only communicating progress and the vibrancy of the partnership externally to investors and other counterparties, but also internally to the next generation of talent coming up in an organization." Ridgemont went from about 13 people at its 2010 founding to nearly 75 today, alongside its fund sizes
2. Scale Widens the Spread
Asked how rising rates change the calculus, Lee turned the conversation to a distinction between what scale does for a GP and what it does for an LP's realized returns.
Scale is a genuine advantage for the manager. Larger GPs can afford dedicated AI expertise and other capabilities that small managers simply cannot resource on their own
But scale compresses the dispersion of outcomes an LP actually receives. "We have — I don't know — 50 years more of financial returns that would show you the lower mid-market, which is where we focus, and in the mid-market the returns are much more volatile. You can get much more upside, you can lose, but there's much more of a spread"
The law of large numbers works against LPs chasing a repeat of a small fund's returns at scale. A company that's already extracted most of its operational upside can only produce, in Lee's phrase, "a 3x out of it" — and no amount of added resources changes that ceiling
Rising rates raise the degree of difficulty on top of that. Purcell put a number on the regime change: "the 10-year sitting at 4.8% today. If you go back to early 2022 it's 1.75%." He calls the resulting environment a "fundamental math problem" for a basic buyout model, where the wall a firm has to climb "is just steeper" than in the prior decade
3. The Smoke-and-Mirrors Test
Witkowsky asked whether operational improvement has replaced cheap leverage as where returns come from now. Lee's answer split operating partners into two categories LPs struggle to tell apart.
Both effective and ineffective operators exist inside the same job title, and the failure mode cuts both ways. Some operators "get over their skis" and become overconfident about businesses they think they understand better than the actual CEO, sitting on that CEO's shoulder rather than letting them run the company
"From our vantage point, some of it is smoke and mirrors," Lee said. GPs hire operating partners and put them on the website, but either the individuals aren't effective or the firm doesn't deploy them well
The end of near-zero rates doesn't automatically mean operations fill the gap. Higher rates removed a tailwind, but a firm still has to hire the right operators and actually use them correctly — the two failures aren't the same problem
This is genuinely hard for an LP to diligence from the outside, which is why Lee frames it as one of the harder judgment calls Abbott makes before committing capital
4. The Old Math Is Dead
Lee described a real example — a large buyout shop he and Purcell both know — where a generational gap in expectations became an active management problem.
Junior partners were still underwriting to a rate environment that no longer exists. "The junior partners thought they were still in the ZERP period — zero inflation rate — and were still trying to get three-and-a-half x at exit"
Senior leadership had to intervene directly. Their message: "We're in a totally different environment. Also there are fewer transactions right now — if we can get two-and-a-half x, get out"
The junior team's instinct was to hold rather than sell, not grasping that IRR degrades the longer a position is held even if the multiple eventually recovers
The exit market itself is not fully liquid right now, in Lee's account, because sellers across the industry are still hoping to reach multiples they saw in the prior rate regime rather than accepting today's
5. Better Under Than Over
Witkowsky raised the difficulty of marking a private portfolio honestly in a period when valuations themselves are in question. Purcell's answer was a clear preference, backed by his own firm's data.
"I would much rather explain why we were 30 or 40% undermarked in terms of the profit sitting in our P&L in a given quarter than 10 or 20% overmarked."
A credibility gap from being caught overmarked is much harder to recover from than one from being conservative. Lee agreed, framing it as a matter of trust with investor partners that's expensive to rebuild once broken
Ridgemont's own data shows the scale of the gap that can exist between marks and eventual outcomes. "Something like 25% of the dollar-weighted premium or gain is not reflected in financial statements two quarters prior to exit" is the general pattern Purcell cited — and he disclosed that Ridgemont's own numbers have run higher, "as high as 45% of the dollar-weighted gain not existing in our financial statements two quarters prior to exit"
Lee's standard for Abbott is calibrated, not maximally conservative. He wants marks "one standard deviation" conservative, not two — close enough to the real number that Abbott can act on what's actually happening in its portfolios rather than working from a deliberately sandbagged figure
Overstating marks and then correcting downward reads as a loss even when the underlying deal was fine. A 6x written down to a 5x, in Lee's framing, becomes "a disappointment instead of a celebration" and raises unwarranted questions about the rest of the portfolio
Being too conservative carries its own fundraising cost. A firm whose book marks are roughly half what its GP verbally claims the assets are worth puts LPs in the position of not knowing which number to trust — and that gap "can hurt materially in a fundraise process" if it isn't caught until it's too late to fix
6. From One LP to Global
Purcell described how Ridgemont's investor base evolved from a single captive relationship into a genuinely diversified, global roster — and credited the discipline that relationship taught the firm.
For 17 years, Ridgemont had exactly one LP: Bank of America's own balance sheet, before spinning out in 2010. "This notion of raising capital on behalf of institutional LPs was completely foreign to us"
Ridgemont has had over 100% net dollar reup from its investor base since founding — existing LPs, in aggregate, have kept increasing their commitments across every successive fund
The firm credits its LPs, Abbott among them, with coaching it on how to build the business itself, not just how to make good individual investments — a distinction Purcell said isn't intuitive for people focused purely on being sharp investors
Through Fund Four, the LP roster was largely North American. Fund Five, closed last fall, was the fund where Ridgemont deliberately expanded its investor base to be "truly global in nature," a stated strategic goal rather than an accident of who showed up
7. Secondaries Aren't Access
Witkowsky asked about secondary sales — LPs selling out of a fund early — and how Ridgemont handles requests that could reflect poorly on the fund's own performance.
Ridgemont treats facilitating a secondary sale as part of the job of being a good partner, even when it privately disagrees that selling out of a position is the smartest move for that investor — the firm has handled only a handful of these over the years
Being cooperative on secondaries has become an unexpected sourcing channel. Ridgemont has met new institutional investors by helping existing ones exit, turning what looks like a defensive process into relationship-building
Lee said Abbott keeps a fully separate secondary pool from its primary investing, run purely on financial terms with no mixing between the two — a discipline that historically wasn't universal in the industry
Buying into an oversubscribed fund via the secondary market used to be a real strategy roughly a decade or more ago, when demand could outstrip a hot manager's capacity several times over. Lee said that play has mostly disappeared because the secondary market is now deep and liquid enough that investors can usually find a better financial route to the exposure they want
Where he still sees it is venture, and even there he said the names people most want into — Sequoia, Benchmark — generally do not trade
8. Backing People, Not Process
Asked how Abbott evaluates a re-up versus a brand-new commitment, Lee described an approach built around personnel risk rather than institutional pattern-matching.
Every commitment, including a fifth or sixth fund with an existing manager, is underwritten as if it were new. Abbott picks only three to five, sometimes six, names a year in North American buyouts — the largest and most sophisticated private equity market in the world — and its re-ups come out of that same small count. Lee contrasted that with most of the market, which he said screens perhaps 300 opportunities and commits to a percentage of them
The firm runs separate sleeves for venture capital, which it has done for 40 years, small buyouts, large buyouts, Europe and emerging managers, each split again for different client types
"We still think it's a human game." Process and systems matter, but the specific individual in the seat — in this case, Jack Purcell — is what Abbott is actually underwriting, because people's circumstances change: divorce, becoming empty nesters, shifting life goals
Personnel movement across the industry has accelerated, which Lee said has made this diligence harder and more important simultaneously — LPs increasingly have to track which individual actually led which deal at a firm, since a departing partner's own account of their track record needs independent corroboration
A firm losing a strong investor to a spinout can be good for the industry even when it's disruptive for the firm they leave, because it lets a proven individual's track record attach to a new, smaller vehicle rather than staying buried inside a large team
9. Succession Is the Blind Spot
Closing on where private equity is heading, Witkowsky asked about succession planning specifically — and Lee described it as a place where otherwise excellent managers fail LPs.
Abbott is on its fourth generation of ownership, which Lee credits to a formalized, systematic process rather than an ad hoc handoff each time a leader steps back
Abbott will not back a GP with no real succession plan, regardless of track record. Lee described managers who have delivered 3x, 3x, 3x with no plan for who runs the firm next, and who answer the succession question with something like "my father worked till he or she was 80 years old" — which, Lee said, is "not a succession plan" but a plan to hold the shares for another 20 or 30 years
Purcell said Ridgemont has been through roughly six or seven rounds of succession-related transitions, and that the muscle built from doing it repeatedly is now a codified part of the partnership rather than an improvised event each time
Lee's colorful framing for why this is so hard industry-wide: "When you hire sharks, what do you expect? They want to eat, right?" The founder who built the firm is a shark holding onto economics longer than they should; the next generation underneath is chomping to get their share — a dynamic he says makes succession one of the hardest problems in an industry full of type-A personalities
There's no guarantee the next generation performs as well as the last. Lee's blunt version: the founder might deliver 3x, and "that person might be able to deliver 1.8x" — with no way for an LP to know in advance which outcome they're underwriting
10. Where the Industry Goes
Witkowsky's closing question was where fundraising and the asset class go over the next five years, and whether the industry consolidates into something smaller.
Lee's answer to a prospective client asking for this year's theme was that Abbott does not have one. Capital is locked up for ten years, he said, so he cannot forecast two years out, let alone the exit five years out or the wind-up at ten. Abbott's instruction is to commit the same amount every year and collect vintage-year diversification instead of a view
The vintage can matter more than the manager, on Abbott's numbers. First-quartile returns in a good year run around 25-26%; first-quartile returns in a bad year run around 17% — and both are first-quartile performances by some of the same managers, who simply cannot beat the period they invested in
Purcell expects the number of managers, or line items, to consolidate even as new emerging managers keep appearing, with institutional investors putting more capital to work across fewer relationships
The retail and retirement channel is the variable that would change everything, and he thinks it cuts both ways. If the high-net-worth or 401(k) market opens up, "we're in a whole new ball game." He called it "super dangerous" for a retiree to simply put money in, but said he would want his own parents' money in private equity through an adviser who knows the asset class, because first- and second-quartile managers have added returns above public markets over twenty years while a beta exposure to private equity has historically underperformed them
He attributed the last couple of dim years to the public market rather than to private equity. Public equity returns have been "just exceptional," which makes the public-market-equivalent benchmark private managers are measured against unusually hard to clear
His own optimism rests on the US mid-market's supply of targets. There are roughly 50,000 US private companies with revenue between $50 million and $1 billion, only a small fraction of them owned by private equity or another institutional asset owner, and many are held by founders at an age where they have no succession plan of their own
Ridgemont's filter for those companies is deliberately plain. The firm buys service companies and distributors across three end markets — healthcare, industrials and business services — and if a portfolio company cannot be described in half a sentence, in his words, "we've bought the wrong business." He expects nearshoring and the shift from just-in-time to just-in-case inventory to favor exactly that kind of business
Bonus Insights
Ridgemont keeps no restricted list of approved secondary buyers. The host asked whether Ridgemont screens who can buy an exiting LP's position, and whether Abbott sits at the top of that list. Lee joked that he would be happy to be written in; the answer from the Ridgemont side was that the firm has dealt with it only three or four times, has not been dogmatic about who can come in, and has a roster diverse enough that one LP trading out does not affect the business either way
LPs, not just GPs, are churning more than they used to. Lee said it used to take someone dying or retiring to open a job on the institutional side; today there's enough movement that a departing LP contact can end up representing a firm at two institutions over time, which he called a net positive even though a new CIO sometimes wants to "wash out" a predecessor's manager relationships to make their own mark
The bottom line from both sides of the table is that a fund's size, its marks and its succession plan are the three places an LP looks for evidence that a manager is being honest about what it can actually deliver — and that after a decade in which cheap money did much of the work, the mid-market firms that keep raising capital will be the ones that can show which of the three they have changed.
Products, Companies & Tools Mentioned
Abbott Capital Management (Young Lee's firm, a fund-of-funds investor marking 40 years, with dedicated primary and secondary pools)
Ridgemont Equity Partners (Jack Purcell's Charlotte-based mid-market firm, spun out of Bank of America in 2010, which closed its largest fund yet at roughly $4 billion in 2025)
Bank of America (Ridgemont's sole LP for its first 17 years, before the firm spun out in 2010)
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