Fundraising? No problem
Brookfield Asset Management is more bullish than most when it comes to fundraising expectations for 2023. On a Wednesday earnings call, chief executive Bruce Flatt told analysts he anticipates fundraising this year to be in line with the $93 billion of capital commitments the firm raised in 2022, which was a record year for the business.
BAM collected $12.8 billion in the first quarter, including $400 million for its latest flagship private equity fund, Brookfield Capital Partners VI, and another $400 million for PE co-investments. Its Oaktree unit raised $4.1 billion. BAM has raised $19 billion year-to-date. Fund VI sits at $9 billion today – in line with where its predecessor closed – and still has “meaningful capital to raise”, chief financial officer Bahir Manios noted. Almost 70 percent of the firm’s fundraising over the past year has come from public pensions, sovereign wealth funds and insurers.
President Connor Teskey attributed BAM’s bullishness in part to its “huge relationships in North America, but also across all major Middle Eastern countries”, he said. “We’ve got significant relationships across the entirety of Asia.”
BAM is also investing in LPs’ backyards, which is its biggest differentiator, Flatt added. “We have large, large businesses in countries running operating businesses in the countries: in India, Australia, Korea, Japan, China, Saudi Arabia, Qatar, Dubai, Abu Dhabi. And therefore, our relationships are both locally with our different regional businesses, and they just tend to be different and not just about fundraising.”
SoftBank’s latest losses
Japanese tech conglomerate SoftBank has had another tough year. Speaking on its full-year earnings call this morning, CFO Yoshimitsu Goto told analysts that the firm made a ¥5.3 trillion ($39.3 billion; €36 billion) loss on investments across its three Vision Funds – Fund I, Fund II and LatAm – for the financial year to 31 March. These funds have collectively generated an $8.5 billion cumulative loss on investments since inception. Its quarterly losses have, however, been improving since this point last year.
“January to March, April to June last year were the toughest time, and we have recorded a lot of valuation losses,” Goto said. “But every quarter the negative numbers have been smaller and smaller, so it’s coming back to the level that we started.” Goto was speaking in the place of the company’s chief executive Masayoshi Son, who traditionally has led these calls. Here are some key figures from the results:
- Vision Fund I has invested $89.6 billion and so far generated a $101 billion investment return, of which $45.1 billion has been exited and $20.6 billion is held in public companies.
- Vision Fund II has invested $50.2 billion and is net-negative by $18.3 billion, in part due to an unfavourable economic environment and soaring interest rates.
- Only 50 companies enjoyed mark-ups over the year, representing a $3.6 billion gain. Comparatively, 359 suffered markdowns, representing a loss of $43.4 billion.
- The firm deployed just $400 million from Fund I and II last quarter, a modest increase from the $300 million posted in each of the two preceding quarters, yet a sharp decline versus historic activity levels.
Willing and unable
When it comes to Chinese PE, one might assume that APAC-focused funds of funds have remained something of a commitment bright spot at a time when many international LPs are putting the market on pause. After all, FoFs pride themselves on offering diversified exposure to a variety of markets – mitigating some of the risks associated with any one country, while capturing some of the potential upside.
However, a senior executive at a Chinese venture capital firm told Side Letter over coffee recently that, while many FoF executives in APAC are still expressing a desire to back China funds, getting it past their investment committees is another matter altogether. “We’re sceptical now of any fund of funds that says they’re pulling their sleeves up and putting in the work on China, because they’ll still struggle to get the commitment approved from an IC in America,” the executive said.
Some China GPs have attempted to repackage themselves in recent years as regional or even global players, with Singapore an increasingly popular base from which to do so. It is too early to tell whether that is enough to win LPs back around and calm nerves, though investors are usually wary of any hint of style drift from their GPs.
While we’re on the subject…
Spokespersons from Canada’s largest pensions, including CPP Investments, Caisse de dépôt et placement du Québec and Public Sector Pension Investment Board, were invited on Monday to testify to the government about their exposure to China. “Exposing the fund to Chinese funds gives us access to one of the world’s largest fastest growing economies and sectors such as consumer discretionary, logistics and real estate…It moves in ways uncorrelated to developed markets,” Michel Leduc, global head of public affairs and communications at CPPIB, told Canada’s House of Commons Special Committee on the Canada-People’s Republic of China Relationship.
China holdings make up 9.8 percent of CPPIB’s investment portfolio, Leduc said. If the ESG risk is much too high, it would consider “buying, holding and selling”, he said. “If we are not satisfied with the level of risk or information, we will absolutely invoke any one of those.” CPPIB was active in the country’s PE market last year even as some North American investors pulled back, with key deals including for HR services provider 51job and a $35 million co-investment in cosmetics business HCP Global alongside the Carlyle Group.
Such conversations are significant. As we’ve previously noted, Canada’s neighbour to the south has, for example, taken steps to interfere in institutional exposure to China on the public equities side.
Neuberger Berman’s Benelux boss
Neuberger Berman has named UBS Asset Management veteran Fekko Ebbens as its head of institutional Benelux, per a statement. Ebbens joins NB in The Hague following a more than 16-year stint at UBSAM, where he was most recently global head of institutional client coverage. Prior to this, he covered institutional business development at Lombard Odier Darier Hentsch. Current Benelux head Cas Peters will step into a senior adviser role.
Today’s letter was prepared by Alex Lynn with Carmela Mendoza, Madeleine Farman and Katrina Lau.