Side Letter: BlackRock’s ESG dialogue; Investec’s GP trends; Lightrock’s close

BlackRock says its capital flows don't seem to reflect any negative impact from increased political dialogue. Plus: highlights from Investec's latest GP Trends survey; and LGT-linked Lightrock has exceeded its hard-cap. Here's today's brief, for our valued subscribers only.

Just happened

BlackRock’s Fink: telling their story (Source: BlackRock)

BlackRock’s ESG dialogue
BlackRock appears unfazed by the anti-ESG movement in the US. That was one takeaway from its third-quarter results on Thursday. “In the last few months, especially in the United States, our industry and BlackRock itself has been the subject of increased political dialogue,” chief executive Larry Fink told analysts on an accompanying earnings call. “We’re telling our story so that people can make decisions based on facts, not on misinformation, not on politicisation by others. I do believe that [for] the vast majority of our clients, our voice is resonating as strong as ever. We hear it in our dialogue with them and we see it in our flows.”

In August, Texas published a list of 10 firms – BlackRock included – that state investment funds will be required to divest from, and around 350 funds they will be banned from investing in, because they are deemed to have boycotted fossil fuels on ESG grounds, our colleagues at Responsible Investor reported (registration required). The day before the list was published, Florida governor Ron DeSantis banned state pension managers from investing using ESG.

On Thursday’s call, BlackRock president Rob Kapito said its inflows across multiple asset classes “speak volumes” about the impact (or lack thereof) of the anti-ESG movement. The firm raised $6 billion through commitments and net inflows to alternatives in Q3, with particularly strong demand in infrastructure and private credit. “Importantly, I think what it’s resonating is that we’re providing clients, from any views, choice,” Kapito added. “So there are clients who have views on one side of the conversation related to sustainability… And there are many clients who still believe that investing in [a] sustainable strategy is the right long-term strategy.”

Headwind highlights
Just over half (55 percent) of GPs are anticipating more covenant breaches from their portfolio companies in the coming 12 months. That was one finding from Investec’s 2022 GP Trends Report last week. The lender polled over 150 GPs between July and August. Here are some other highlights:

  • In the wake of interest rates hikes and soaring inflation, 71 percent of GPs expect the availability of debt finance to decrease. Nevertheless, the majority of respondents expect to deploy more capital in the next year compared with the preceding 12 months, with 41 percent predicting a 10 to 25 percent increase in spending.
  • Some 41 percent expect their returns to remain unchanged across the next two years, while 47 percent of respondents expect them to improve relative to 2021. Last year, two-thirds of respondents had expected returns to improve over the coming two years.
  • GPs with larger funds are more bullish on returns over the next two years than the industry average.
  • When it comes to fundraising, 66 percent expect to raise more – or at least the same – amount of capital for their next funds.


Fundraising at Light(rock) speed
Impact firm Lightrock, a subsidiary of Liechtenstein-based LGT Group, has closed its Lightrock Climate Impact Fund at €860 million – €60 million north of its hard-cap and €260 million above its initial target, our colleagues at New Private Markets report (registration required). Lightrock partner Kevin Bone told NPM that the incredible interest in the fund demonstrated a “significant acceleration of LP interest for climate impact strategies”. LCIF closed just nine months after its launch, a feat in itself amid such a congested fundraising environment.

LCIF will primarily focus on investments into companies working on the energy transition, decarbonisation of industries, sustainable transportation, sustainable food and agriculture, and enabling related technologies and services. Investor demand for climate strategies has risen to such an extent that some LPs believe it should be considered a distinct asset class, as Private Equity International noted earlier this month.

More Mercer for Titanbay
Wealth managers and private banks using the Titanbay fundraising platform will now have access to Mercer’s fund ratings due diligence summaries on its menu of funds. The move is an expansion of the pair’s tie-up, which began in 2021, in which Titanbay structured feeder vehicles through which private banks and wealth managers are able to invest in Mercer’s private market offerings. Following the latest move, a yet-unnamed senior executive from Mercer will take up a seat on Titanbay’s investment advisory board. Such platforms are at the forefront of PE’s push into individual investors, as PEI explored in February’s Deep Dive.

Dig deeper

LP meetings. It’s Monday, so here are some LP meetings to watch out for this week.

17 October

18 October

19 October

20 October

21 October

Today’s letter was prepared by Alex Lynn with Carmela MendozaTobias Waters and Madeleine Farman