Side Letter: Blackstone on coronavirus, KKR on reputation, Dyal’s liquidity plans

How Blackstone views Covid-19 and how PPMs are changing to reflect the outbreak. Plus: Dyal considers liquidity and KKR is considering the industry's reputation. Here’s today's brief, for our valued subscribers only.

Just happened

Responsible gathering

Tomorrow we kick off our two-day Responsible Investment Forum in New YorkPrivate Equity International‘s Isobel Markham will be there interviewing Blackstone’s head of ESG, Alison Fenton-Willock. Senior writer Jordan Stutts will be interviewing NAIC CEO Robert Greene. If you’re not lucky enough to be there, we will bring you the highlights.

Coronavirus updates

The risk according to Blackstone

Coronavirus (Covid-19) has wiped $1.5 trillion from global stock markets, and private equity will not be spared from the impact. Blackstone has warned that the epidemic poses a “material” risk to the firm’s financial results and to its funds’ performance, according to regulatory filings. With quarantines and travel restrictions disrupting global supply chains, the ultimate impact of coronavirus is impossible to predict, the firm said in the “risk factors” section of its Form 10-K. Head of growth equity Jon Korngold told Bloomberg TV last week that the epidemic hadn’t deterred Blackstone from investing in China and the Pacific Rim. But with the situation changing on a daily basis and with due diligence near impossible to conduct in Greater China, we wouldn’t hold Korngold to his word – at least not in the short term.

PPM language

Law firm Ropes & Gray tells us private funds are adding language on risk factors related to coronavirus to PPMs and PPM supplements ahead of fundraising. An example shared with PEI warns: “The coronavirus epidemic could result in a general economic decline and have an adverse impact on the Fund’s investments, or the Fund’s ability to source new investments or to realize its investments, in particular if such an epidemic persists for an extended period of time or continues to spread globally.”

Summit rescheduled

PEI Media (publisher of this letter and a number of other private markets-focused products) has rescheduled its flagship Infrastructure Investor Global Summit in Berlin to 22-25 June because of increasing concerns over the spread of coronavirus. Likewise our PERE Asia conference has moved from March to June and our Seoul and Tokyo infrastructure summits have been moved to September.

For sale: GP interest, two previous owners

We’ve long wondered if and when there would be some secondary trading in the tight-knit world of GP interests, the niche dominated by Dyal Capital Partners, Blackstone and Goldman Sachs. We may get a better idea soon, as Dyal – the most prolific of these three by our measures – is considering some sort of liquidity event, sources tell sister title Buyouts’ Chris Witkowsky. Some notes:

  • These vehicles tend to be permanent capital, as Dyal’s is, rather than 10-year funds, thus providing investors with cashflow streams in perpetuity.
  • For this reason, buyers in any Dyal deal would logically be asset owners with a long time horizon – not your typical secondaries funds.
  • Dyal is said to be talking to advisor PJT Park Hill, sources tell Chris.
  • The vehicle in question is relatively young: the $5.3 bilion 2017 Fund III.

Reputation, reputation, reputation! 

KKR has recognised anti-private equity sentiment as a risk factor worth noting in its regulatory filings this year, in another sign that key players are taking reputational risk more seriously. KKR’s business depends “to a large extent on [its] business relationships and [its] reputation for integrity,” so allegations of “improper conduct” as well as “negative publicity and press speculation about us, our investment activities or the private equity
industry in general” could be more damaging to a PE firm than to other types of business. Alex Lynn has the full story here.

They said it

“While our preference in amending the Volcker Rule might have been simply to lean on the ‘DELETE’ key, we recognise the legislative mandate and appreciate the more surgical and careful approach reflected in this proposal”

Republican SEC commissioners Elad Roisman and Hester Peirce hail a massive set of reforms to the Volcker Rule as a necessary, but not sufficient step, reports Bill Myers at sister title Regulatory Compliance Watch.


You can’t spell confusion without CFIUS. US GPs are grappling with the newly enacted Foreign Investment Risk Review Modernization Act of 2018 from the Committee on Foreign Investment in the United States (CFIUS). The law – designed to prevent foreign actors gaining access to “critical” technology, infrastructure and data in the US – has implications for managers with LPs from outside the country. Warning: “Large investments are no longer the only ones to worry about – as even minority investments with certain rights to information or governance in a TID business will now fall into CFIUS’s jurisdiction,” notes Connor Hussey in sister title Private Funds CFO.

Winners across asset classes. PEI is not the only publication unveiling its award winners this week. Sister titles Private Debt InvestorInfrastructure InvestorPERE and Real Estate Capital also unveiled their rolls of honour.

We did the math

Setting standards. Bemused by the lack of standardised performance reporting in private equity? The Global Investment Performance Standards, or GIPS, could arguably be the answer. A survey of delegates at our CFOs & COOs Forum suggests this is not yet the case.

Dig deeper

Institution: Massachusetts Pension Reserves Investment Management Board
Headquarters: Boston, US
AUM: $79.08bn
Allocation to alternatives: 24.0%
Bitesize: $50m-$100m

Massachusetts Pension Reserves Investment Management Board has confirmed $660 million-worth of private equity commitments across four vehicles, a contact at the pension informed PEI. These are the pension’s first commitments to the asset class since confirming its 2020 private equity portfolio plans earlier this month.

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

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Today’s letter was prepared by Toby MitchenallIsobel MarkhamAdam LeCarmela MendozaAlex Lynn and Connor Hussey

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