Side Letter: Blackstone’s $22bn, Mor-gone Stanley, ILPA’s fair fees

Blackstone eyes biggest-ever buyout fund, a Morgan Stanley CIO bids farewell, ILPA wants to make fees fair. Here’s today's brief, for our valued subscribers only.

Just happened

Record-breaking Blackstone

Blackstone has raised at least $22 billion for its eighth flagship fund and could be on track to beat Apollo’s record $24.7 billion haul in 2017, according to Bloomberg. If it does, Fund VIII will be at least a third larger than its $18 billion predecessor, which closed in 2015 and was running at a 1.4x MOIC on total investments and 21 percent net IRR as of 31 December – see the latest performance of the firm’s PE funds here.

The firm’s prediction that AUM will reach $1 trillion over the next eight years is looking more likely.

Senior departure

Neil Harper, CIO of Morgan Stanley Alternative Investment Partners private markets unit, is leaving the firm. The London-based MD is understood to be staying in the private equity industry. The group has committed around $18 billion to private markets through fund investments, secondaries and co-investments, dabbling in asset classes as varied as real estate, venture capital, mezzanine debt and impact.

Mumbai, buy, buy!

Pan-Asia firm PAG has tapped KKR’s former India head of special situations and healthcare services as its new head of India private equity. Nikhil Srivastava will operate from Mumbai and lead what is understood to be a growing Indian PE team. The move comes as PAG looks to deploy its third buyout fund, which closed on $6 billion in November.

Indian PE is hotting up. Firms completed at least $5.8 billion of Indian private equity, infrastructure and real assets buyouts last year, compared with $5.4 billion in the previous four years combined, per EMPEA’s Industry Statistics Year-End 2018.


Fair deal on fees. The Institutional Limited Partners Association has teamed up with consultant Colmore to help investors validate fees, expenses and carried interest allocations charged by managers. When a GP emails its fee charges to the LP, it includes Colmore, which then checks the fees against the LPAs and other documents, and flags any discrepancies. Colmore founder Ben Cook tells us it’s not about “catching out” GPs, but making sure the partnership is delivering returns for everyone.

Fees are a recognised pain point for investors and many, such as the Pennsylvania pension systems, have been under scrutiny for payments to private market managers. As we shared here this week, last year Teachers’ Retirement System of Oklahoma discovered significant errors in fees charged by its managers and is considering external administrative support for fee validation.

Private members’ club. Asset managers should look to private markets as a crucial source of future revenue growth, according to a Morgan Stanley and Oliver Wyman report. Industry revenues are expected to grow at just 1 percent CAGR over the next five years and opening access to private markets has the potential to drive an additional $23 billion in revenue.

The report also noted a growing proportion of AUM inflow will come from historically under-allocated private markets investors, such as high-net-worth individuals, defined contribution pensions and insurers. GPs will surely be licking their lips.

Moving beyond McGlashan. TPG Rise Fund has added former Whole Foods Market co-chief executive Walter Robb (above) to its list of well-known senior advisors that includes former US secretary of state John Kerry and former US secretary of education Arne Duncan. Robb will help expand the fund’s food and agriculture sector, along with the new sector lead Taryn Goodman, who joins with him.

Dig deeper

Want more data? There are more than 6,700 institutions in our database, including BlackstoneTPGMorgan Stanley and PAG from today’s Side Letter.

He said it

“We spent an awful lot of time on subscription lines. It’s an area where GPs continue to feel like they’re receiving very mixed messages from LPs in terms of their appetite for [them].”

ILPA chief executive Steven Nelson talks to PEI about the topic du jour from the industry body’s recent roundtable in New York. More on our chat with Nelson to come.

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Today’s letter was prepared by Adam LeRod JamesAlex LynnPreeti SinghCarmela Mendoza and Isobel Markham

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