Side Letter: Blackstone’s $5.6bn GP stakes raise; Coller’s China launch; PE’s newest lender

Blackstone has built a $5.6 billion arsenal for GP stakes investing. Plus: Coller Capital is looking to tap Chinese secondaries and meet private equity's newest fund finance provider. Here's today's brief, for our valued subscribers only.

They said it

“Private markets – specifically early-stage private equity – is seen [by wealth clients] as the most natural way to create impact.”

James Gifford, head of impact advisory at Credit Suisse, tells affiliate title New Private Markets that clients have become more aware of societal challenges (registration required).

Just happened

Blackstone’s Siddiqui: GP stakes have running room. Source: Blackstone

Raising the stakes

If the GP stakes opportunity-set is indeed as limited as its detractors would have you believe, no one appears to have told Blackstone. The firm held the final close this month on its second GP stakes vehicle, collecting $5.6 billion in the process. Blackstone Strategic Capital Holdings II closed 40 percent north of its $4 billion target and 70 percent larger than its 2013-vintage predecessor.

Fund II, which will make 10 to 15 investments, is already more than half committed. Acquisitions this year include Great Hill Partners, GTCR and Sentinel Capital Partners. In its third-quarter earnings, Blackstone said it expected $1.5 billion-plus would be deployed to these deals. Intensive dealmaking of late has prompted concern about the space becoming saturated, with fewer and fewer quality candidates available for minority investment, a view that strategy head Mustafa Siddiqui rejects.

“This is a really underpenetrated market,” he told our colleagues at Buyouts (registration required), noting that Blackstone’s fresh targets include emerging managers with increasingly large entry sizes. “There are thousands of private equity and other alternative asset managers out there. Firms pop up that I’ve never seen before.”

Do yuan to access Chinese secondaries?

Coller Capital certainly does. The secondaries pioneer has opened an office in Beijing and is exploring appetite for a yuan-denominated investment strategy, affiliate title Secondaries Investor reported last week (registration required). The Beijing office opened in March and has six staff. It is run through Coller’s Hong Kong office, led by partner and head of Asia Peter Kim.

There is no shortage of yuan-denominated PE funds. They raised the equivalent of $163 billion in 2019, compared with only $22 billion for China-focused dollar-denominated funds, according to data from Schroder Adveq and research group Zero2IPO. Recent years have seen the introduction of the qualified foreign limited partnership structure, which enables select foreign managers to invest onshore in yuan using capital raised offshore.

“It will get easier for LPs to exit and a lot of approaches, like buyout [M&A transactions] and secondaries, will become more mature,” George Di, chief operating officer of domestic secondaries adviser Zerone, told PEI last year. “The secondaries market is at a very early stage in China. Only a few LPs know they can use it as an exit approach.”


Fund finance with No Limits

Two former Investec executives have spun out to form fund finance provider No Limit Capital, affiliate title Private Funds CFO reported last week (registration required). Here are some things to know about the London-headquartered group:

  • No Limit is co-led by CIO Slade Spalding, formerly Investec’s co-head of capital call finance and head of GP finance; and chief executive Neno Raic, formerly of Investec’s global institutional sales group.
  • The firm has initial backing from a group of unnamed insurance companies and pensions from the UK, Europe and the US.
  • No Limit will structure subscription lines as a hybrid of an revolving credit facility and an on-request facility, potentially saving GPs about €3 million per €1 billion of the fund size.
  • The firm is targeting between four and eight transactions in its first year, with the intention of being able to do €1 billion tickets by 2023.
  • No Limit will initially target euro-denominated funds and plans to embrace USD vehicles by the end of next year.

SoftBank’s promotions

SoftBank‘s Vision Fund unit has promoted four new managing partners, including the first woman to hold that role in the investment team, Bloomberg reports. San Francisco-based Lydia Jett has been with SoftBank for six years and participated in landmark deals such as US-listed Coupang and Flipkart, according to her LinkedIn profile. Almost half of the 41 investors the Vision Fund has hired since the start of its fiscal year in April are women, the report noted. SoftBank’s other promotions include US-based Vikas Parekh and Dennis Chang in China, a market that SoftBank had taken a pause on earlier this year due to regulatory uncertainty.

Today’s letter was prepared by Alex Lynn with Rod James and Carmela Mendoza