Two and Twenty by Sachin Khajuria

Book Summary

Sachin Khajuria's insider guide to private equity after two decades at Apollo. He explains the 2-and-20 fee structure that built the industry and the three engines driving returns: leverage, operational improvements, and multiple expansion. Central lesson: top firms reject 99 of 100 deals, and partners invest their own wealth alongside clients. Honest about both the critiques and the defenses.

Listen time: 15 minutes. Smallfolk Academy's AI-narrated summary distills the book's core ideas into a focused audio session.

Key Concepts from Two and Twenty

1. The Fee Structure Behind the Industry: Private equity firms charge two layers: a management fee of roughly 2 percent of committed capital per year, plus carried interest of 20 percent of profits above a hurdle rate, usually 8 percent. On a 20 billion dollar fund, the 2 percent alone is 400 million per year in fees, and the 20 percent on a successful vintage can be ten times that. Understanding this structure explains both the talent the industry attracts and the controversies around fund economics. (Chapter 2)
2. Three Engines of Return: Private equity returns come from three distinct levers applied simultaneously. Financial leverage magnifies the base return on equity. Operational improvements — cost cuts, pricing discipline, better management, add-on acquisitions — expand EBITDA margins during the hold period. Multiple expansion captures the gap between the purchase price-to-EBITDA multiple and the sale multiple, especially when the business has gotten measurably better or larger. Decomposing returns this way separates skill from simple market timing. (Chapter 5)
3. Saying No Is the Real Skill: Khajuria emphasizes that top firms reject 99 out of every 100 deals they look at. The scarce resource is discipline, not deal flow. Most failures come from saying yes to a mediocre deal at peak prices, paying too much, and then watching macro conditions compress the exit multiple. The partners who stay around for decades are the ones who can calmly walk away from a deal everyone on the team loves because the math does not support it. (Chapter 8)
4. Eat Your Own Cooking: A defining cultural feature of top PE firms is that senior partners invest substantial personal wealth alongside the limited partners. Carry alignment is one thing — but committing your own millions forces a different kind of discipline. Khajuria argues this alignment is what separates real PE from both hedge funds where the manager often only wagers other peoples money and traditional active management where the portfolio manager has no skin in the game. It also helps explain why senior PE partners tend to be patient, conservative, and risk-aware in a way pop culture rarely credits. (Chapter 11)
5. The Industry Expands Beyond Buyouts: The modern PE platform is not just leveraged buyouts anymore. Firms now run private credit funds (lending to companies that banks can no longer serve), infrastructure funds (roads, airports, data centers), growth equity, real estate, and increasingly sports franchise investments. Each strategy uses the same organizational spine — raise committed capital, charge management fees, share profits — but applies it to a new asset class. The result is a rapidly growing share of the global economy that operates outside public markets. (Chapter 14)

About the Author

Sachin Khajuria spent more than two decades in private equity, most of them as a partner at Apollo Global Management, one of the three largest PE firms in the world alongside Blackstone and KKR. He founded Achilles Management, a private investment firm, and has served on the boards of companies across Europe, North America, and Asia. A graduate of Cambridge University, Khajuria writes for Bloomberg and the Financial Times and is frequently cited on CNBC and the BBC as one of the few senior industry figures willing to explain private equity to outside audiences. Two and Twenty is his first book, pitched as an insiders education for readers who want to understand how one of the most consequential asset classes in modern finance actually works. He writes with the quiet authority of someone who has sat at the table during fund raises, deal approvals, and occasionally painful portfolio reviews.

Frequently Asked Questions

Is this book accessible to non-finance readers?

Mostly yes. Khajuria assumes basic familiarity with concepts like EBITDA and multiples but explains the industry mechanics clearly. Readers without prior exposure may want to skim a glossary of PE terminology alongside it, but the core arguments translate well.

Is this a defense of private equity or a critique?

Primarily a defense — but an informed one. Khajuria engages the critiques head-on (job cuts, leverage, fees) rather than dismissing them, and concedes where the industry does fall short. Readers looking for a pure attack on PE will want to pair this with a critical perspective such as Jeffrey Hookes The Myth of Private Equity.

How does it compare to Barbarians at the Gate or King of Capital?

Barbarians is a narrative of one deal at one moment. King of Capital is an institutional biography of Blackstone. Two and Twenty is different — a practitioners explanation of how the entire industry works today, written from the inside but at the industry level rather than the deal level.

Should retail investors care?

Increasingly yes. Private markets are opening to retail through interval funds, BDCs, and registered private-credit vehicles. Understanding how PE firms actually generate returns — and the risks in the fee drag and leverage — is becoming genuinely useful for anyone with more than a basic portfolio.

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