Side Letter: Blackstone’s growth hire, Fidelity CIO on PE’s democratisation, IR takeaways

Is the private equity industry's move downmarket inevitable? Perhaps, but not at the cost of the asset class's illiquidity premium. Here's today's brief, for our valued subscribers only.

They said it

“We believe the industry should evolve on these important issues in the interest of more efficient and transparent markets.”

Talking on a Q1 earnings call, Goldman Sachs chief executive David Solomon says his bank will continue to focus on the quality of sponsors, sponsor economics, investor protections and disclosures when underwriting SPAC transactions.

Just happened

Blackstone grows in Europe
Late yesterday evening Europe time we brought you the exclusive news that Blackstone had appointed Paul Morrissey to lead its European growth business. The seasoned tech investor will help invest the $4.5 billion Blackstone Growth fund, which held its final close at the end of March and has taken stakes in companies such as oat milk manufacturer Oatly.

Growth-focused funds raised $58 billion last year, a steep drop from $103 billion the year before. Still, the market could rebound in 2021 as EQT and Carlyle Group come to market with vehicles dedicated to the strategy, which sits between buyout and venture.

“Investors are attracted to growth funds because they usually clean the cap table – enabling a lot of venture firms and investors from different rounds to exit, resulting in an easier-to-understand shareholding structure,” Jean-François Le Ruyet, a partner at Paris-based fund of funds Quilvest Capital Partners, told PEI.

Fidelity CIO on the democratisation of PE
Yesterday we caught up with Andrew McCaffery, chief investment officer at Fidelity International, the $706 billion asset manager, to discuss all things PE. Readers will recall Fidelity’s tie-up with fundraising platform Moonfare last month, a partnership that will help Fidelity clients access GPs on the Berlin fintech’s platform. We asked McCaffery how he sees the increasing democratisation of private equity and how the asset class is likely to fit into Fidelity’s future offerings. Technological and regulatory issues must first be addressed for more progress to be made, he said. But, for McCaffery, PE’s illiquidity premium is there for a reason.

“One of the elements of democratisation is not just about access to the private assets, it’s about: how do you align your long-term investment goals and develop real returns on your capital, how is that best achieved? It’s actually to align some of that investment and time horizon of the investment more closely together,” McCaffery said.

Stay tuned for the full interview next week.

PEI IR Forum takeaways
Missed this week’s virtual PEI Investor Relations, Marketing & Communications? Here are some key takeaways:

  • LP tip for first interactions: “Be pleasantly persistent. I respond when people say, ‘Hey I would love to know what you are doing, your goals and aspirations,’” said one portfolio manager at a public pension fund. Investors are actively always evaluating their roster of GPs, the LP added. “The no today can be a yes in the next fund.”
  • LP pet peeve: When IR executives use their CIO or board connections as a pathway in, that’s not resourceful and cuts off the investment officers. “Do some homework, understand my network, rather than going top-down. Use the right path to engage us,” said the portfolio manager.
  • When talking about your ESG initiatives: “The portfolio is the amplifier,” said one communications manager at an emerging markets firm. A GP can have all the best behaviours from sourcing and integration to realisation, but the most important thing is instilling behaviours among portfolio companies.
  • Get innovative: Capitalising on investors’ appetite for digital content was the play for most IR professionals last year. From expanding thought leadership pieces, to increased participation in events and webcasts, as well as launching podcasts – that’s all here to stay.

Essentials

EMPEA plants flag in Asia
Emerging markets body EMPEA has opened an office in Singapore, its headquarters in Asia, per a statement. The office will be led by senior advisor Steve Okun who was former director for public affairs in Asia for KKR. The new digs allows the organisation to “build bridges among investors across global markets with Singapore as a key nexus”, EMPEA said. Asia is leading all other emerging markets in perceived attractiveness for investment this year, according to EMPEA’s latest global LP survey. Read our Q&A with its chief executive Cate Ambrose here.

Manulife’s private wealth appointment
Manulife Investment Management has named Alex Catterick as senior managing director for its high-net-worth strategy for private markets, according to a statement. He will help develop, launch and grow the Canadian giant’s range of products for HNWIs.

They did the math

Most LPs have inflation on their minds, according to research by Eaton Partners/Stifel.


Today’s letter was prepared by Adam Le with Rod James and Carmela Mendoza.