Side Letter: Carlyle rainmaker’s tips; Apollo taps Goldman; PE’s bolt-on blitz

Carlyle’s former top IR exec in Asia-Pacific shares his thoughts from more than two decades in the industry. Plus: Apollo taps an ex-Goldman partner for its push into credit secondaries and PE bolt-ons soared last quarter. Here's today's brief, for our valued subscribers only.

They said it

“In looking at it we had a concentration on buyout funds and we were not consistent in funding those over time. Now we have been working to repair relationships with GPs, ensuring communications and re-alignment of interest are happening.”

CalPERS chief Marcie Frost tells Top1000Funds about historic performance issues in the pension’s PE portfolio.

Just happened

David Tung

Parting advice from an industry veteran
It’s not every day you get to catch up with an industry veteran who’s seen the PE industry change as much as David Tung (pictured). Carlyle Group’s former top IR exec in Asia-Pacific retired from the firm in March, as we exclusively reportedPrivate Equity International senior editor Adam Le recently caught up with Tung, who shared some thoughts and reflections from more than two decades in the industry. Here are some highlights:

  • Fintech fundraising platforms will “absolutely” be the next big thing in fundraising. “They’ve started to change the landscape by enabling a much broader audience of investors to participate in the asset class,” he said. “I think it will open the door to a lot more opportunities.”
  • Malaysia is an untapped mammoth market for LP capital. Institutional investors such as Employees’ Provident FundKWAPKhazanah Nasional and Permodalan Nasional Berhad collectively hold almost $400 billion in assets. “They can write very large tickets and have become quite active as well,” he said, adding that they “fly quietly”.
  • RMB to US dollar fund restructurings – touted as a huge opportunity for domestic Chinese GPs to tap outside capital – haven’t lived up to expectations from a size point of view. “On paper it looks promising, but in practice, it hasn’t really born fruit as much as people had hoped” due to a constantly changing regulatory environment and administrative queues for such processes.
  • His advice to anyone starting out in the industry: “Don’t burn your bridges, and treat everyone with courtesy. There’s no magic to it.” Also, be persistent when fundraising – a mantra passed down from co-founder David Rubenstein. “Yes, you will get rejections all the time, but continue and persist on, and you will get it.”

Apollo’s latest strategy launch
In early April we brought you the news that Apollo Global Management had hired an executive search firm to help its launch into secondaries. That has just taken a big leap forward with the firm saying yesterday it has secured $1 billion, backed by the firm’s insurance clients, to deploy for its credit secondaries strategy. Earl Hunt, an incoming partner from Goldman Sachs, will co-lead the effort and the firm is recruiting for the other co-lead, affiliate title Secondaries Investor reports (registration or subscription required). Apollo joins the likes of Pantheon and Tikehau, which are already involved in the strategy, and Ares Management which jumped into secondaries with its purchase of Landmark Partners in March. Read all about credit secondaries here.

Earnings watch
ICG Enterprise Trust, the listed investment trust that invests in ICG deals as well as third-party funds, reported earnings for the year ended 31 January today. Key takeaways:

  • The portfolio generated a 24.9 percent portfolio return over the year.
  • The trust, which focuses on buyouts in developed markets, made £139 million ($193 million; €160 million) of new investments and committed £95 million to third-party funds including Apax XPAI Mid-Market Fund and Bain Capital Tech Opportunities Fund.
  • It received £137 million from the realisation of individual companies and £72 million from fund disposals, including the partial sale of its holding in the 2013-vintage Graphite VIII.
  • Its exposure to the US rose to 42 percent, up from 30 percent at the same point last year.

They did the maths

Europe’s deal bonanza
European PE deal value rose about 80 percent in the first quarter of this year to a quarterly record of €158.8 billion, according to Pitchbook’s Q1 2021 European PE Breakdown report. Transactions rose 28.5 percent to 1,936 while an uptick in micro- and mid-cap deals buoyed activity. Some other highlights:

  • IT deals accounted for 24.7 percent of deals in Q1, the largest proportion on record.
  • A whopping 71 percent of buyouts were bolt-on acquisitions, suggesting buy-and-build strategies are central to value-creation theses.
  • European PE-backed IPOs raised more than €30 billion, the highest quarterly mark since Q2 2011.

Today’s letter was prepared by Alex Lynn with Adam LeCarmela Mendoza and Michael Baruch.