Side Letter: Blackstone earnings, ICG’s ESG-linked credit line

Blackstone's Jon Gray says the firm could launch products in China's yuan market. Plus: KKR in market with its 13th North America fund and Ares prioritises DE&I. Here's today's brief, for our valued subscribers only.

They said it

“There are some challenges around alignment of interest: when sponsors earn their economics, what the size of those economies are… Overall for capital markets, I think it’s a positive. I think there will be some changes and reforms over time to make it even better.”

Blackstone COO Jon Gray discusses the booming SPAC market on Wednesday’s earnings call.

Just happened

Blackstone in a nutshell
Blackstone garnered $95 billion of fresh commitments in 2020, an almost 30 percent decline year-on-year, according to its latest earnings statement on Wednesday. To put that in context, the firm had collected more than $100 billion for the previous three years in a row (with 2019’s total bolstered by a $26 billion mega-raise). Here are some other key takeaways:

  • Fundraising: Blackstone’s inaugural growth equity vehicle is nearing its $4.5 billion hard-cap, chief operating officer Jonathan Gray said. Its second Asia fund will be “meaningfully larger” than its $2.3 billion debut and the firm is back raising its fourth tac opps vehicle.
  • Deployment: The firm’s PE arm deployed $8.2 billion last quarter, an increase of 41 percent from the same period in 2019. Its annual investments fell 13 percent to $22.9 billion.
  • Geographies: Asia is a top priority. “There’s an opportunity over time for us to offer products that are RMB-based. That could be something that happens over time, that could be large scale,” Gray said.
  • Performance: Life sciences and tech – sectors that have fared well in the pandemic – are the “largest drivers of performance in our funds”, Gray said. Its fifth life sciences vehicle collected $4.6 billion in July.

KKR’s lucky 13
Speaking of blue-chips, KKR is seeking at least $14 billion for its next flagship North America fund, according to sister title Buyouts (subscription or registration required). KKR North America Fund XIII, which is expected to hold a first close in May, will charge a 1.5 percent management fee, with 1.35 percent charged on commitments received before the first close.

An Edda-fying raise
Shifting from North America to North Europe… Nordic direct secondaries and growth equity firm Verdane Capital has held the final close on its second direct buyout fund on its €540 million hard-cap. Edda II, which is roughly 80 percent larger than its 2018-vintage predecessor, will target positions in tech-enabled companies across the region.


PE’s future leaders
Who are the future leaders of PE? That’s a question PEI attempts to answer in its annual Future 40 ranking, which recognises the investors, dealmakers, fundraisers, operators and lawyers who’ll be leading the charge in years to come. Nominations are open for the third rising stars of PE list. Tell us who deserves a place in this year’s cadre and check out who made the class of 2020.

ICG is the latest to join the nascent world of ESG-linked credit. The firm has entered into a new £550 million ($751 million; €620 million) revolving credit facility linked to carbon emissions targets and the integration of climate risk assessments into its investment decisions, per its Q3 earnings statement on Thursday. The facility, which replaces its existing facilities, has an initial term of three years with the possibility to extend for an additional two years.

Ares’ diversity hire
Ares Management has appointed a global chief diversity, equity and inclusion officer, says sister title Private Funds CFO (subscription of registration required). Indhira Arrington joined from Wells Fargo, where she led the strategic planning and execution of diversity sourcing initiatives. She will lead the firm’s DE&I efforts internally and serve as advisor to continue such initiatives at the portfolio company level. Find out how other PE giants are driving similar changes here.

Top of the class
Tech-focused buyout group Francisco Partners came top in the 2020 HEC-Dow Jones Private Equity Performance Ranking – a measure of the most successful PE funds. Fellow tech enthusiasts Genstar CapitalHg and Thoma Bravo were also among the top performers. The study analysed performance data from 529 PE firms and the 977 funds they raised over a 10-year period.

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

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