Private Equity News & Analysis

Side Letter: Abraaj alumni, CalPERS is go, LPAC issues

Can you get a job in PE if you have Abraaj on your CV? Here’s today's brief, for our valued subscribers only.

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Just happened

Life after Abraaj

How hard is it for Abraaj Group professionals to find gainful employment in the PE industry? That depends on their level of seniority at their erstwhile employer. Many lower-level personnel from the former emerging markets giant have landed on their feet and a small number of senior execs have found new homes. But LPs’ ESG policies may make it harder for Abraaj’s former top brass to remain in the industry.

“Anyone up to a certain level is totally immune and most people have a chance of being snapped up,” says a PE-focused recruiter. “It’s when they start to get partner in the title that questions will be asked.”

The firm has lost around two-thirds of its staff, which numbered in the several hundreds prior to the alleged wrongdoing.

Source: CalPERS

CalPERS: all systems go(ish)

After 18 months of working on a constantly-evolving plan for higher allocations to private equity, CalPERS finally got approval to move forward with its proposed “innovation” and “horizon” vehicles in an investment committee meeting on Monday.

But it is not a green light to make investments just yet. The approval will help CalPERS move to the next phase – identifying and mitigating risks associated with the new strategies – but it will need to go back to the board for approval on any contracts and investments.

“I believe the key risk of the proposed business model will be in the implementation details … particularly in regard to the structure and alignment of interests,” CIO Ben Meng (pictured) said. He added that the staff would not commit to “any artificial timeline nor to any force of arbitrary outcome”.

Heavy lies the LPAC responsibility

Big-name pensions are feeling uneasy about their role in GP-led deals, writes sister title Secondaries Investor. According to legal sources, many are alarmed that despite having no fiduciary duty to their fellow LPs, their high profile in the LPAC means their judgement has a strong bearing on how others act. With proposed deals getting more complex and potential conflicts less clear, could their decisions land them in a sticky legal spot down the line? ILPA will be tackling the issue in its GP-led guidelines, PEI understands, landing soon on a desk near you.

Essentials

European LPs more bullish. North American LPs are prioritising re-ups in 2019, so they’ll have less room for new GPs. Europeans, on the other hand, have adjusted their portfolios in the face of Brexit, and now expect to grow allocations, according to Rede Partners’ 1H 2019 Liquidity Index.

Other findings from the report:

  • Continued voracious appetite for co-investments (96 percent of LPs expect to maintain or increase allocations);
  • Less enthusiasm for secondaries due to high pricing;
  • Steep decline in distributions expectations.

GP interesting. The increased appetite for buying stakes in alternatives GPs is making such deals riskier, according to Fitch Ratings. Higher pricing for GP interests and managers demanding more specialised structures are the main culprits. Illiquidity is adding fuel to the fire for fund of firms strategies that have finite life vehicles.

Buyers attracted to the recurring fee income such deals generate should beware: high asset prices are threatening to depress fund manager revenues, as Cobalt GP data revealed in February.

IK plants a flag in Copenhagen. IK Investment Partners has opened an outpost in Copenhagen, its fifth continental European office. Six investment professionals from its Danish-Norwegian team (currently based in London) are relocating there, says partner Thomas Klitbo, who is heading up the new office. The firm will continue to recruit in Copenhagen for its second small cap fund, which raised €550 million in February 2018. However, Klitbo was tight-lipped on whether investments in Denmark will come from its small cap fund; its eighth flagship fund, which gathered €1.85 billion in November 2016; or its debut minority-stakes fund, which it launched in November last year with a c.$570 million target.

Dig deeper

Want more data? There are more than 6,700 institutions in our database, including Abraaj, CalPERS and IK Investment Partners from today’s Side Letter.

He said it

“As we go elsewhere people will question us on what we knew … If we knew, that’s bad news and if we didn’t know, that’s bad news, too.”

A former Abraaj senior executive tells PEI they expect questions when seeking new roles in the industry.

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Today’s letter was prepared by Toby Mitchenall, Isobel Markham, Adam Le, Rod James, Carmela Mendoza and Preeti Singh.

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