Goldman’s Petershill Partners IPO – key points to know

The GP stakes firm plans to deploy as much as $300m each year using the company’s own money, leverage and proceeds from the planned $5bn listing.

Goldman Sachs Asset Management‘s Petershill unit has unveiled its plans to provide an exit to investors in its GP stakes strategy – a growing sector within private markets that has been questioned in the past over its approach to an endgame.

The firm on Monday published a prospectus detailing its intention to float a portfolio of 19 stakes in alternative investment firms. The unit, named Petershill Partners, will list on the London Stock Exchange’s main market and is understood to value the portfolio at more than $5 billion.

If successful, the listing would be at least the second “exit” for Petershill’s private equity holdings. In 2019, Goldman returned capital to investors in its Petershill II fund via a $350 million securitisation – a strategy that Dyal Capital Partners, now Blue Owl Capital, also employed last year via a $1 billion offering.

Here are some key things to know about the listing.

What’s in the portfolio?

Petershill Partners will comprise 19 portfolio GPs representing $187 billion of assets under management between them. Of this, private equity accounted for 49 percent, private real assets for 22 percent, absolute return for 19 percent and private credit for 10 percent. Seven of the firms have private equity offerings: Accel-KKR, Clearlake Capital, Francisco Partners, General Catalyst Partners, Harvest Partners, Industry Ventures and Littlejohn & Co.

The initial portfolio does not contain stakes in all of Petershill’s partner firms. Stakes in managers such as Permira and Incline Equity Partners were made after the plans to float the 19 firms were finalised last year, according to a source familiar with the listing.

Why London?

Petershill Partners is listing in London as opposed to New York due to the former having a more specialised understanding of governance frameworks for listed companies of this type, according to a separate source familiar with the process. Certain details such as the independent board’s remuneration have been disclosed as part of this (details here), though details of the operational management team’s remuneration will not be disclosed as that team stands separate to Petershill Partners and is employed by Goldman Sachs, Private Equity International understands.

Listing the GP stakes will provide some level of detail into the underlying partner companies’ operations, though don’t expect to see profit and loss statements for these GPs appearing in Petershill Partners’ quarterly reports.

Growing AUM and strong performance in private markets is the key attraction

The 19 firms grew their aggregate AUM by 91 percent from the time of each of their acquisitions until 31 December, and the number of strategies by 69 percent. Between 2018 and 2020, these firms exceeded Petershill’s private markets fundraising estimates by more than 40 percent.

The firms in the portfolio have delivered a 17.3 percent net internal rate of return for all private markets flagship funds older than five years as of 31 March, including 20.6 percent for private equity and 13.4 percent for private real assets. These GPs had delivered a 1.8x average net multiple of invested capital for private markets strategies, 2.6x just for private equity and 1.6x for private real assets.

More managers will be added

Petershill expects to deploy approximately $100 million to $300 million each year using the company’s own money, leverage and proceeds from the listing. It will make up to two follow-on acquisitions per year in addition to new direct equity opportunities and secondary deals. The majority of new prospective acquisitions are expected to be private capital managers.

This could include more tech-focused managers: Petershill pivoted towards the technology sector in 2017, increasing its private markets AUM in this sector from 9 percent in 2017 to 34 percent as of June this year. More recently, it has “begun to reposition its AUM for the effects of the covid-19 pandemic” by focusing more on GPs that target technology, healthcare, balance sheet repair and ESG.

Read our coverage of who owns what in the GP stakes game here.