Side Letter: BlackRock closes PE ELTIF; Aussie U-turn on unlisted performance test

BlackRock has closed its debut European long-term investment fund, which provides retail investors with access to its direct PE deals. Plus: Australia's revised superannuation performance test could reignite an age-old debate and Private Equity International's latest Spotlight podcast tackles Q1's record fundraising. Here's today's brief, for our valued subscribers only.

They said it

“The pandemic has highlighted the liquidity needs of portfolio companies and underscored the realities of the marketplace and how long it takes to realise value. We are sometimes squeezing the industry into this five-year commitment period, 10-year life model and it doesn’t always work well, both with what the GPs want and the liquidity needs of the LPs” 

Marco Masotti, a partner at Paul, Weiss, Rifkind, Wharton & Garrison, tells PEI that GPs and LPs are increasingly rethinking fund terms to provide more flexibility around holding assets and capital use

Just happened

BlackRock scoop
Here’s a BlackRock scoop to start your day. The firm has held a final close on its debut PE European long-term investment fund, per a statement seen by Side Letter. BlackRock Private Equity Opportunities is a €509 million vehicle that will provide the region’s retail investors with exposure to the firm’s direct PE investmentsHere’s what we know:

  • Ten European wealth managers committed to the fund, including BNP Paribas Private Banking and Wealth Management
  • The PE ELTIF also gathered commitments from 25 European institutional investors
  • The minimum investment is €125,000, a spokeswoman said
  • The fund will deploy capital on a co-investment basis alongside GPs that have previously made investments with BlackRock
  • It has made eight investments to date and will target media and technology, healthcare, and industrial and business services
  • The fund has a standard LP structure (10+2 years) and is targeting “PE-type returns”, the spokeswoman added

Headphones on…
In our latest Spotlight podcast, editors and reporters from PEI Media’s various titles discuss the driving factors behind PE’s record $180 billion of fundraising in Q1. Key quote: “LPs have really been sticking with their most trusted relationships, sticking with those managers that have a track record of success, and those who are fairly easy bets,” says Chris Witkowsky, editor of Buyouts. “That’s because the market has been so expensive.”

We’ll be back
Monday is a public holiday in the UK, so Side Letter will return to your inbox on Tuesday. For those of you lucky enough to have Monday off, enjoy the long weekend!

Essentials

Superfund reforms
Australia’s government has (partially) backtracked on its annual performance test for superannuation funds. Last month, PEI reported that a proposed government test for superfunds could affect their appetite for alternatives due to its use of listed benchmarks for unlisted assets. Although an amended draft, published this week, includes unlisted benchmarks for property and infrastructure, Side Letter has learned from a Treasury spokesperson that PE will continue to be measured against listed equities.

“Equity is not separated by listing status, only domicile status,” the spokesperson said. “In practice, this means private equity based in Australia is picked up as Australian Equity, and private equity based internationally is picked up as International Equity (either hedged or unhedged).”

Whether it makes sense to benchmark PE against the public markets is an age-old debate. “Infrastructure and real estate are meaningfully benchmarked in the market,” Mitchell McCallum, executive director at MSCI, the firm behind the unlisted indices chosen for the test, told affiliate title Infrastructure Investor. “At its current point in its life, the PE side of things is not as clear cut, and is something that the industry and MSCI continue to build.”

Yuan-to-dollar restructuring
Buhuo Ventures, a Chinese VC firm, has completed a yuan restructuring to raise its first US dollar fund, PEI reports this morning. The firm transferred partial stakes in four assets from its 2017-vintage RMB Fund I into a dollar-denominated vehicle. The transaction was worth more than $100 million, of which around two-thirds was net asset value and the remainder was follow-on capital for new investments. Such deals are gathering momentum as China’s maturing PE market looks to raise capital from what is perceived to be a more stable LP base.

Dig deeper

Institution: Cathay Life Insurance
Headquarters: Taipei, Taiwan
AUM: NT$6.95 trillion

Cathay Life Insurance has agreed to commit $50 million to Coatue Growth V, $60 million to Thomas H. Lee Equity Partners IX, $50 million to Hellman & Friedman Capital Partners X and $80 million to Insight Partners XII.

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

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


Today’s letter was prepared by Alex Lynn with Carmela Mendoza.