Side Letter: BlackRock’s back, Partners Group’s milestone, Lex on fire

BlackRock has put key person issues behind it and its plans for domination are back on track. Partners Group, meanwhile, has reached a private markets milestone and Lexington has become secondaries largest fundraiser... probably for a short while only. Here’s today's brief, for our valued subscribers only.

Just happened

Green light for BlackRock

Larry Fink

BlackRock‘s debut private equity vehicle, Long Term Capital Fund, is “back in business”, following a temporary suspension of investments in December triggered by the departure of Mark Wiseman, former chairman of the firm’s alternative investment unit. The LTPC fund has now received “unanimous consent” from its investors to replace Wiseman with Robert Kapito as chairman of the executive investment committee and “key person” in the fund’s LPA, a source with knowledge of the matter tells PEI. Other news: the firm raised an additional $1.1 billion last year for its LTPC, according to chairman and chief executive Larry Fink (pictured) on the firm’s fourth quarter 2019 earnings call on Wednesday.

That brings total capital raised for fund to $3.85 billion thus far, or almost a third of the $12 billion it sought when it launched LTCP in 2018. It’s still got a way to go and no new deals yet thus far, other than its $875 million stake in Authentic Brands Group.

Here are some of the firm’s highlights in 2019, according to Fink:

  • It generated $14 billion of illiquid alternatives net inflows in 2019, up from $8 billion in 2018 and just $1 billion the year prior;
  • Its tech services platform brought in big revenues (close to $1 billion in 2019 and more than double its revenues in 2014); and
  • It’s embarking on one of its biggest projects in recent years – putting sustainability at the core of its business. More on that in Carmela Mendoza’s report.

Partners Group diversifies

Partners Group hit a milestone last year with non-private equity strategies accounting for more than half of the Swiss firm’s $94 billion in assets under management for the first time, as of the end of last year, according to an AUM update this morning. The firm still expects direct equity to contribute “significantly” to fundraising over the next 12 months. Other headline figures: the firm raised $16.5 billion last year and expects to raise as much as $19 billion this year; it added 262 professionals last year and could hire another 200 this year.

Lex appeal

Only 16 days into the start of the year and the first megafund is upon us: secondaries giant Lexington Partners has raised $14 billion for the largest ever pot of capital dedicated to the strategy, sister title Secondaries Investor reports. LCP IX will predominantly focus on PE secondaries and the firm expects to benefit from the rise of so-called “GP-led transactions” – processes such as fund restructurings and stapled tender offers initiated by managers themselves. Lexington will likely play at one end of the secondaries spectrum with Ardian at the other – the French giant focuses mainly on the “plain vanilla” market for LP fund stakes.

NB: With Ardian likely to raise $18 billion or more for secondaries this year, Lexington’s crown may be fleeting.

Essentials

2019 fundraising download. Are PE dollars flowing towards Europe? Are LPs’ clamouring for growth equity? Check out PEI’s latest annual fundraising report, which breaks down fundraising last year across 11 interactive slides.

Manulife make it official. Last year we predicted: “a big LP will turn asset manager”. We are proved somewhat right by Manulife Investment Management, which has just formally closed its first PE fund six months after using the secondaries market to seed it. The US$1.5 billion fund of funds Manulife Private Equity Partners is made up of a portfolio of North American mid-market funds and co-investment stakes from managers such as Thoma Bravo, Apollo and CD&R. AlpInvest Partners underwrote the transfer of the portfolio off the Canadian insurer’s balance sheet before syndicating half of it out to other investors. How did our other predictions fare? No comment.

CD&R about to raise a fund. Clayton Dubilier & Rice, a pioneer of the hands-on approach to value creation, is in talks with investors about its next fund, says sister title Buyouts. Its last fund was $10 billion, raised in 2017.

Dig deeper

Quarter pounder. Some weighty fund closes happened in Q4 of 2019; here are the top five. Click the fund to see who invested.

Blackstone Capital Partners VIII $26.2bn

Permira VII  $12.3bn

Green Equity Investors VIII $12.0bn

TPG Partners VIII $11.5bn

Platinum Equity Capital Partners V $10.0bn

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

He said it

“In some cases we find reasons to adjust the fair value of the company based on the idea […] this company has an additional risk so I need to use a higher discount rate.”

Arnout van Rijn, CIO of Robeco Asia-Pacific Equities, explains how poor ESG performance means a lower price paid for listed stocks at the Asian Financial Forum in Hong Kong on Monday.


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Today’s letter was prepared by Toby MitchenallIsobel MarkhamAdam LeRod JamesCarmela Mendoza and Alex Lynn.


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