Cutting ties with Russian capital
The private equity market is seeing what appears to be the first example of a limited partnership stake disposal driven by Russia’s invasion of Ukraine, instigated by a fund manager itself. London-headquartered Pamplona Capital Management said yesterday it was “redeeming” the LP interests held in its funds by LetterOne, a private investment company founded by Russian oligarchs Mikhail Fridman and Petr Aven who have been sanctioned by the EU.
The “ongoing crisis in Ukraine makes such relationships increasingly challenging for our portfolio companies, their management teams, customers, employees, and counterparties throughout Europe and the rest of the world”, Pamplona said.
A spokesperson for LetterOne confirmed to Side Letter that the firm’s investment in Pamplona amounts to $2.7 billion. It called the GP’s move “disappointing” and added that while it had received no concrete discussions about the redemption, it would co-operate “constructively”.
GPs firing their LPs is extremely rare. Unlike hedge funds, PE funds don’t generally provide for redemptions, hence the rise of the secondaries market, Sarah de Ste Croix, a partner who advises on private funds at Stephenson Harwood, tells Side Letter. A GP wanting to do so would have to rely on provisions within the limited partnership agreement relating to withdrawals and redemptions following a force majeure event, she adds.
It’s unclear how Pamplona would go about “redeeming” LetterOne’s LP positions. If it acquires them itself, it could need to finance the purchase to the tune of $2.7 billion, assuming the funds are fully drawn down. If it facilitates a secondaries sale, the buyer would typically pay a price in relation to the net asset value of LetterOne’s stakes. The devil will be in the detail in Pamplona’s LPA.
Our take: LPs parting ways with GPs as a result of Russia’s invasion is something we haven’t really seen yet, but GPs seeking to ensure their LP base isn’t intertwined with sanctioned Russian capital is likely the next big story.
Behind closed doors
One of the trustees of the $75 billion Los Angeles County Employees’ Retirement Association has questioned whether the board is too private in its discussions around fund commitments. In 2015, the board adopted a policy at the request of investment staff to have discussions concerning investments in non-public executive session to avoid confidentiality concerns and making market impact. LACERA is reviewing the policy as a part of due course, and, while investment staff did not recommend a change, trustee Joseph Kelly said at Wednesday’s quarterly meeting that the policy is at odds with the public organisation’s aim of “doing business in public”.
Kelly, who agreed the confidentiality sensitivities of GPs should be respected, said there were “mechanisms available in open session to respect those confidentiality issues”. The item was a non-voting one on the agenda, meaning the policy won’t be changed this time. Chief investment officer Jonathan Grabel indicated through staff comments that while he did not favour a change to the policy now, it could be appropriate to adjust it in the future to make discussions around investment policy more inclusive.
They did the math
Almost four in five private capital CFOs globally consider gender equality to be a ‘crucial’ or ‘important’ consideration when assessing investment opportunities, per a report from Intertrust Group. Their concern is unsurprising given that 74 percent of investor respondents said they expected daily, weekly or live data insights into DE&I from their managers.
Golding’s gold rush
European asset manager Golding Capital Partners gathered a record €2 billion of commitments last year, bringing its total AUM to €12 billion, according to a Thursday statement. The Munich-headquartered fund of funds gained 28 new investors in 2021 from markets such as Southern Europe, East Asia and South America. Its largest commitment was provided by Germany’s TK Pensionfonds AG via a multi-asset mandate. The firm also deployed a record €1.5 billion last year. Priorities for 2022 include building relationships in Switzerland, Italy and the Nordics; holding a first close on its debut impact fund mid-year; and launching an energy transition strategy in the third quarter.