Side Letter: Bain’s LP alignment; Verdane’s fund jumps; PE’s workload worries

Bain Capital's latest Europe fund is a lesson in modest appetites and LP alignment. Plus: Verdane funds' target jump and private equity's congested fundraising environment causes some to rethink their career paths. Here's today's brief, for our valued subscribers only.

Just happened

Bain: stumping up a large chunk of its latest Europe fund (Source: Getty)

The importance of Bain aligned
Bain Capital could be setting an important example for the industry to follow with its latest European buyout fund. Bain Capital Europe Fund VI stands out for a number of reasons, not least of which is its relatively modest target increase. The Boston-headquartered firm has set a €5 billion hard-cap on the fund, representing just an 11 percent jump in size from its 2018-vintage predecessorPrivate Equity International reported Tuesday. By way of comparison, KKR‘s latest Europe fund is seeking 72 percent more than its predecessor raised, while PEI Media-owner Bridgepoint‘s latest Europe fund is targeting 20 percent more than its predecessor raised, according to PEI data.

Also of note is Bain’s €500 million GP commitment to Fund VI, equivalent to 10 percent of its hard-cap. Bain has long sought greater parity with its LPs than many GPs: as far back as 2015, affiliate title PE Hub noted that the firm’s investment professionals had committed $250 million to Bain Capital Asia Fund III, which was targeting $2.5 billion. Though the average GP commitment has doubled in the space of a few years, as PEI reported last year, the 4.8 percent industry average is still some way short of Bain’s.

GP alignment was named the top issue for LPs in a survey published earlier this year by Probitas Partners, with 60 percent of respondents citing it as a concern, versus 40 percent the prior year. Given the intense competition for LPs’ time and money in today’s congested fundraising environment, we wonder if a modest appetite and demonstrable LP alignment may just give Bain a competitive edge in its part of the market.

Verdane’s double fundraise
In contrast to Bain’s modest target increase is Verdane, which is seeking to double its firepower across at least two vehicles. Regulatory filings show the firm, which has carved out somewhat of a niche in European growth, is seeking $1.17 billion for its latest flagship fund, which has traditionally invested in direct secondaries, and $1.17 billion as well for the third in its Edda buyout fund series. Both targets represent a rough doubling of the amount raised by their respective predecessor vehicles. A spokesperson for Verdane declined to comment on the fundraises, but Side Letter understands that flagship Verdane Capital XI has already raised half its target.


Heading for an exit?
PE’s manic fundraising environment is driving some UK executives to ponder a different career, per a report by private markets accounting platform LemonEdge. In a 300-strong survey of PE and VC professionals, asset managers and investment banks, among others, 31 percent said high-pressure could make them leave the industry, while a further 31 percent said they had at least consider leaving their present role. Heavy workload (42 percent), manual processes (36 percent) and long working hours (32 percent) were the top contributors to pressure.

“Larger funds usually come with increased complexity, but also increased deal size,” LemonEdge co-founder Gareth Hewitt tells Side Letter. “Depending on the complexity and deal size of the fund and the ability for technology to perform at scale, we would think [the issues being faced by workers] can be alleviated. It’s certainly our goal from the technology side of it.”

This dynamic is unsurprising given the difficulty some LPs and investor relations teams are encountering as a result of so many firms coming to market at once, and with such large targets. Just earlier this month, one PE fundraiser told Side Letter they were scheduling overlapping fundraising calls to ensure maximum efficiency. With PE firms targeting $1.2 trillion among them as of April, the workload is unlikely to lessen any time soon.

A Suter for potential LPs
Southeast Asia growth and early stage investor Northstar has appointed a UBS veteran to lead its investor relations. Roger Suter joins as head of IR and executive director in Singapore, according to his LinkedIn. Suter spent about 13 years with his former employer, most recently as a director and client adviser for Southeast Asian family offices. Northstar closed its fifth flagship fund in December on $590 million, short of its initial $800 million target, according to PEI data.

Dig deeper

Institution: Korean Teachers’ Credit UnionHeadquarters: Seoul, South KoreaAUM: 41.4 trillion Korean wonAllocation to alternatives: 63.92%

Korean Teachers’ Credit Union has issued a request for proposals for domestic private equity managers.

The pension plans to commit a total of 265 billion Korean won ($209 million; €196 million) for a maximum of 14 fund managers. KTCU is looking for managers with funds in four size categories: more than 150 billion Korean won for large-scale managers; more than 80 billion Korean won for mid-scale managers; more than 30 billion Korean won for small-scale managers; and more than 15 billion Korean won for rookie managers. Managers need at least five years’ experience in the private equity industry.

The submission date is 3 June and a decision will be put to the investment committee in late July.

The 41.4 trillion Korean won pension has 63.9 percent of its portfolio exposed to alternative investments.

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

Today’s letter was prepared by Alex Lynn with Adam LeRod James and Helen de Beer.

– This letter was updated to reflect the 20 percent difference in fund size between Bridgepoint’s Fund VI size and the target of Fund VII. The original letter noted the 40 percent difference between Fund VI’s target and Fund VII’s target.