Side Letter: 4.1x reasons to visit Russia; Alpine’s 125% incline; Hedges on PE’s turf

One of Russia's only active private equity firms appears to be having no trouble on the fundraising trail, and there are 4.1x reasons why. Plus: US buyout firm Alpine Investors has more than doubled its firepower in Fund VIII and hedge funds are encroaching on PE's turf. Here's today's brief, for our valued subscribers only.

They said it

“We’re always worried about our human capital, making sure they’re aligned… But we converted to a C Corp and we only have one share of one class of shares. We only have one tax rate I’m worried about and that’s the corporate tax rate.”

Carlyle chief Kewsong Lee tells CNBC that corporate tax issues are of greater significance to the firm that a potential change in the way carried interest is taxed.

Just happened

Russian to a final close
Elbrus Capital, one of Russia’s few active private equity firms, has passed the halfway point for its latest fund, PEI reports this morning. The firm has collected $316 million en route to its $600 million target for Elbrus Capital Fund III. European and US funds of funds joined existing DFIs and Middle Eastern sovereign investors in a second and third close.

That Elbrus secured commitments from any Western LPs whatsoever will be particularly impressive for anyone who’s followed events surrounding Baring Vostok Capital Partners founder Michael Calvey in recent years. Calvey and a colleague were found guilty last month of embezzlement in a case some believe to have been politically motivated.

A clue to Elbrus’s success in the face of unthinkable odds can be found in its performance: the firm’s 2014-vintage $550 million Elbrus Capital Fund II had generated a 4.1x gross MOIC and 21 percent net internal rate of return as of Q2 2021. Decent returns won’t be enough to convince every investor to put their money into Russia, but those brave enough to do so may find themselves well-rewarded.

Alpine’s steep ascent
Alpine Investors, the US mid-market firm, has closed its eighth fund on its $2.25 billion hard-cap, according to a LinkedIn post from Evercore, which advised on the raise. The vehicle was in market for four months. Fund VIII is more than double (125 percent larger, to be precise) the size of its 2019-vintage predecessor, which closed on its $1 billion hard-cap in November that year.

IR you ready?
Today’s marks the start of PEI’s Investor Relations, Marketing & Communications Global Forum. The two-day virtual event will include a fireside chat with Marlene Timberlake D’Adamo, chief DE&I officer at the California Public Employees’ Retirement System and a conversation with ILPA’s managing director, Jennifer Choi, around best practices for incorporating DE&I into one’s role and organisation. More details here.

Essentials

Giants join the ESG party
Two giants of institutional investment – Abu Dhabi Investment Authority and China Investment Corporation – this week signalled their intent to get more serious on ESG, our colleagues at New Private Markets report. The Chinese sovereign wealth fund last year formulated “guiding principles” that include integrating ESG factors into decision-making processes and “throughout the lifecycle” of investments, and raising awareness of ESG among CIC’s employees, per its annual report. It later plans to weave these factors into all investment activities, such as due diligence and post-investment monitoring.

ADIA, not known for its transparency, has also “committed capital to a number of opportunities set to benefit from the move to a lower carbon economy”, per its annual report, out yesterday. The move follows “significant developments in the global discussion on climate change”, managing director Hamed bin Zayed Al Nahyan wrote. ADIA is one of a growing band of investors taking climate risk more seriously. More on that trend in this year’s ESG report.

Hedges on PE’s turf
A trend of hedge funds muscling into PE’s territory in Asia appears to have reached US shores. These funds have deployed $153 billion across 770 private deals – mostly VC – so far this year, beating a record $96 billion across 753 deals last year, the Financial Times reports. Earlier this year, Eric Woo, co-founder of San Fran VC Revere told Bloomberg that hedge funds in Asia “can be quite disruptive, because they can be a lot more fast-paced”. With VC firms already having to adapt their model to compete with larger, non-traditional participants, this latest influx of funds will be unwelcome indeed.

Dig deeper

Institution: China Life Insurance Company (Taiwan)
Headquarters: Taipei, Taiwan
AUM: NT$6.97 trillion

Cathay Life Insurance has agreed to commit $50 million to Summit Partners Growth Equity Fund XI and $30 million to KKR Health Care Strategic Growth Fund II.

The Taiwanese insurer’s recent private equity commitments have focused on diversified sectors in North America, Western Europe and Asia-Pacific.

For more information on Cathay Life Insurance, as well as more than 5,900 other institutions, check out the PEI database.


Today’s letter was prepared by Alex Lynn.