Wrong Assumptions
When the thesis is a trend, fundamentals become foe
KKR just handed Accell Group — owner of Raleigh, Lapierre, and Babboe — over to its lenders after losing north of €1.4 billion. The original equity. The emergency loans. All of it, gone.
And KKR — one of the most sophisticated PE firms on the planet — wasn’t alone. GBL wrote down its Canyon stake by 43%. Specialized and Pinarello have both acknowledged their own post-pandemic hangovers. The entire industry over-ordered components, sat on bloated inventory, and spent years discounting their way through the wreckage.
So how does smart money make the same mistake at the same time? The thesis.
In the case of KKR and friends, it was simple, easy to tell, and easy to sell: people discovered cycling during COVID. They’re avoiding public transport. They want outdoor exercise. E-bikes are the future. This is a secular shift. Only it wasn’t. It was a bump — a molehill made into a mountain by groupthink and its close cousin, manufactured FOMO.
The reason every pitch deck in 2021 had a COVID behavioral shift slide is the same reason every pitch deck in 2023, 2024, and 2025 has an AI slide. When everyone in the room is nodding, when the data is fresh and the narrative is clean, the critical question gets crowded out: is this a trend, or is this a trade?
Trends work beautifully for traders. Get in early, ride the momentum, get out before it gets stress-tested. But real investment — with multi-year hold periods and leveraged balance sheets — demands something harder to manufacture: fundamentals. Durable demand. Structural tailwinds that don’t evaporate when people can take the subway again.
The Accell story is a reminder that mistaking a cyclical surge for a secular shift is an expensive error. Not because the cycling thesis was stupid — it wasn’t — but because the time horizon of the investment had no margin for being wrong about durability.
Something similar is playing out in real estate. Rates and uncertainty are fueling a lot of head-nodding, particularly among financial value engineers and those who get paid for activity rather than outcomes. But outcomes have a habit of deviating from head nods. And as we have seen, poor assumptions in assessing the asset can make an otherwise solid deal unravel entirely. There’s a word for what assumptions make — and in real estate, it’s not just embarrassing. It’s expensive.