FUND VALUATIONS MOVING UP
Average private equity fund valuations were written up by 5.48 percent in the second quarter of 2009, according to unreleased, preliminary statistics from the State Street Private Equity Index. The marked uptick in average fund valuations follows five quarters of valuation drops and will indicate to many market observers that private equity fund performances may have finally reversed their precipitous declines. Other statistics remain sobering. Private equity as a global asset class at the end of the second quarter turned in a pooled, dollar-weighted long-term IRR of 9.08 percent – well below the projected long-term average target performance hoped for by institutional investors and their consultants.
APOLLO BELIEVES WORST BEHIND IT
Several major funds managed by Apollo Global Management are now reporting positive or flat performances, a dramatic – and unrealised – reversal of fortune from the steep losses reported at the beginning of 2009. In a letter to investors, Apollo founder Leon Black said the firm's investment activities during the worst part of the recession will “set the trajectory for generating what we believe will be outsized returns” for the firm's most recent private equity fund, Apollo Investment Fund VII, which closed on $14.7 billion in 2008. That fund has drawn down only $3 billion to date, and Apollo is now marking those investments at 1.2 times cost, up from “a low of 55 percent of cost”, wrote Black.
ROLE OF LEVERAGE NOT VITAL
The use of leverage by private equity firms to grow companies' enterprise value accounts for one-third of the total growth, according to a report. The study provides evidence to counter the argument that since private equity firms are heavily reliant on leverage, they will face significant difficulties operating in a post-credit crunch market in which leverage is scarce. Of the value created by private equity owners, two-thirds can be attributed to operational enhancements and increasing market multiples, says research conducted by European private equity adviser and investor Capital Dynamics in conjunction with the Centre for Entrepreneurial and Financial Studies at the Technical University of Munich.
VAUCHY HEADS PERMIRA FRANC E
Permira's Paris office has appointed Benoit Vauchy to lead its activities in France. Vauchy, who joined Permira from JPMorgan in 2006, replaces Philippe Robert, who will leave at year's end to “pursue other interests”, Permira said in a statement. Robert has led the Paris office since December 2002, when he joined from Credit Suisse First Boston. At the time, Permira's Paris office had seven investment professionals. It now has three Paris-based professionals, having recently hired former Candover and Apax executive Simon Marc as a principal.
GAGGINI QUITS INVESTITORI
Investitori Associati, an Italian private equity firm, has lost senior partner Filippo Gaggini. He has ended a nine-year career with the firm to become an adviser to rival private equity house Investindustrial. The move mirrors the defection of Luca Destito, formerly a partner at Investitori Associati, who joined Investindustrial in early September. One of the longest established players in the Italian private equity market, Investitori Associati began investing its first fund in 1993.
NAKANI HEADS BACK TO GIH
Kuwait's Global Investment House (GIH) has named past employee Rajiv Nakani as senior vice president and managing partner of its private equity arm, Global Capital Management. He replaces Shailesh Dash, who left the firm at the end of October “to pursue other interests and seek fresh challenges”, according to a GIH spokesperson. Nakani joins from Dubai-based private equity firm Eastgate Capital Group where he had been an investment director since 2007. Prior to that, he was head of investment banking at GIH, a position he held from August 2004.
GOTBAUM GETS WHITE HOUSE CALL
US President Barack Obama has named Joshua Gotbaum, an operating partner with turnaround firm Blue Wolf Capital, as director of the Pension Benefit Guarantee Corporation, which guarantees the defined-benefit pensions of private employers in the US. Gotbaum's nomination must be confirmed by the US Senate. His appointment will not trigger a key-man clause at Blue Wolf, according to a spokeswoman for the firm.
SEC REGISTRATION BILL MOVES FORWARD
The US House Financial Services Committee has overwhelmingly approved a bill that would have major implications for the private equity industry. The Private Fund Investment Adviser's Registration Act, approved by a vote of 67-1, would require firms with more than $150 million in assets under management to register with the Securities and Exchange Commission and become subject to more scrutiny. It will now be sent on to the full House of Representatives for a vote, and if passed, would then need approval by the Senate to become law.
DIRECTIVE ‘TO DRIVE FUNDS AWAY’
The European Central Bank has warned that proposed EU regulations could place Europe's private equity industry at a competitive disadvantage to non-EU funds, adding to a chorus of criticism from the likes of the UK Financial Services Authority and London mayor Boris Johnson. The ECB said if it were passed as currently drafted, the European Commission's Directive on Alternative Investment Fund Managers could drive funds out of Europe to countries and jurisdictions with less burdensome oversight.
CALPERS PRESIDENT WANTS TOUGH PLACEMENT LAWS
Rob Feckner, president of the California Public Employees' Retirement System, believes placement agents should be subject to the same laws that lobbyists follow under California law. In a letter to the pension's 13-member board, Feckner asked board members to support making placement agents subject to the state's lobbyist rules in the California Political Reform Act. “I … believe that the state must adopt stronger transparency and accountability requirements for all parties engaged in activities to influence public pension investment decisions,” Feckner said in the letter.
TPG, CPPIB LINE UP $5.2BN DEAL
TPG and the Canadian Pension Plan Investment Board have agreed to buy pharmaceutical information provider IMS Health in a deal valued at $5.2 billion, which includes the assumption of $1.2 billion in debt. If the deal closes by the end of 2009, it would be the biggest leveraged buyout of the year, topping the pending $2.7 billion buyout of Busch Entertainment by the Blackstone Group.
G PS IN SWEDISH PHARMACY SWOOP
Three local private equity firms have acquired groups of retail pharmacies as part of a SEK5.9 billion (€573 million; $859 million) privatisation of the Swedish pharmaceutical sector. Altor Equity Partners has taken the largest of the private equity-backed stakes with two “clusters” of pharmacies, amounting to 208 outlets with turnover of SEK7.1 billion. Swedish private equity firm Segulah has acquired three pharmacy clusters, comprising 62 outlets with a combined turnover of SEK3.1 billion. Priveq Investment, another Swedish private equity firm, has partnered with listed investment group Investor to acquire 24 pharmacies with a combined turnover of SEK1.4 billion.
$ 2 . 1BN EQUITY LOSS LIKELY AT CAP MARK
US real estate lender Capmark Financial Group has filed for Chapter 11 bankruptcy protection, a move expected to result in the loss of $2.1 billion in equity invested in the company by Kohlberg Kravis Roberts, Five Mile Partners and Goldman Sachs. The firms invested the equity as part of a $16.8 billion deal in 2006, giving them a 78 percent stake in Capmark. Previous financial statements filed by KKR Private Equity Investors, the listed vehicle with which the parent recently merged, suggested KKR was already holding the investment at zero or near zero.
UNISON PARTNER DEATH FOLLOWS PROBE
A partner at Tokyo-based private equity firm Unison Capital died the day after being fired from the firm in relation to an insider trading investigation by the Japanese Securities and Exchange Surveillance Commission (SESC). The firm told sister magazine PEI Asia that it dismissed the partner in question on 27 October; the same day the SESC conducted its investigation at the firm's office. Unison declined to identify the partner, nor explain the cause of death. Details as to the insider trading allegations were also not disclosed. An LP confirmed Kenichi Kiso as the partner investigated for alleged misconduct.
ALLEGED INSIDER TRADING LINK TO PE DEALS
The US Justice Department has charged 14 people and arrested eight of them in a widening insider trading investigation that centres on several major private equity deals. The justice department, working in concert with the Federal Bureau of Investigation, alleges that Zvi Goffer, a former employee of embattled hedge fund Galleon Group, was the leader of an “insider trading network” that allegedly made $20 million trading on inside information about a number of private equity transactions. Galleon Group, at the centre of the probe, has begun winding down its funds.
CERBERUS SPINOUT SEEKS $400M
Tenex Capital Management – a turnaround firm staffed by former executives from Cerberus Capital Management – is seeking to raise $400 million for its first fund. Tenex is headed by Michael Green, a member of Cerberus' investment committee until 2009. He has been joined by five other senior executives from Cerberus, comprising Varun Bedi, a former senior vice-president, and four of Cerberus' senior operations leaders: Chad Spooner, Helge Jacobsen, Joe Cottone and JP Bretl.
PORTFOLIO ADVISERS SECONDARY FUND BREAKS $1BN
Fund of funds specialist Portfolio Advisors has raised its first dedicated secondaries fund, collecting $1.1 billion for investments. The Darien, Connecticut-based firm has been making secondaries investments since 2003, completing more than $1 billion in transactions involving more than 300 underlying partnerships.
GREYLOCK RAISES $575M, LURES HOFFMAN
Silicon Valley venture firm Greylock Partners, which has been making investments since 1965, has closed its 13th fund after collecting $575 million. The fund will focus on investments in consumer technology, services and tech infrastructure. Greylock's 12th fund closed in 2005 after collecting $500 million. Along with the fund close, Reid Hoffman, a co-founder and executive chairman of business social networking website LinkedIn, has joined the firm as a partner.
ROMNEY JUNIOR NEARS FINAL CLOSE
Solamere Capital, the fledgling firm launched by Tagg Romney, son of former US presidential candidate Mitt Romney, is nearing a final close on its $200 million debut fund. Solamere has collected the full amount, but will not officially close the fund until the end of January 2010, according to a source with knowledge of the situation.
CDC INTO SIERRA LEONE
UK fund of funds CDC Group has become the first development finance institution to invest in Sierra Leone since the end of the country's civil war in 2002. CDC has committed $5 million to the Sierra Investment Fund (SIF). SIF is managed by Manocap, a manager based in the nation's capital, Freetown, and invests in small- and medium-sized businesses and start-ups.