Side Letter: Carlyle’s fundraising plans; new manager boom; latest podcast

Carlyle Group's fundraising tsar discusses private wealth; emerging managers eye H2 2021 launches; and a PE firm ties its carry to decarbonisation. Here's today's brief, for our valued subscribers only.

They said it

“We won’t pay two and 20.”

Mark Fawcett, chief investment officer at UK pension Nest, tells the Financial Times (subscription required) private equity is too expensive for his institution

Just happened

Q&A with Carlyle’s Urquhart
How will Carlyle Group set about raising at least $130 billion by 2024? It’s a good question and one we put to Nathan Urquhart, the alternatives giant’s global head of investor relations, who sat down with us for our Fundraising Report in the April issue of Private Equity International. Central to its plans is a focus on private wealth, specifically in Europe and Asia. About half of fundraising is expected to come from its global private equity business, which also includes real estate and infrastructure. Find out more about Urquhart’s plans to staff up the IR team, how Carlyle thinks about terms for its four-year fundraising goal and generating top returns for its LPs as it scales its funds in the interview here.

Good year for fundraisers
Speaking of fundraising, the second half of 2021 could see a boom in emerging managers hitting the fundraising trail. Lara Banks, managing director and co-head of PE at investment consultant Makena Capital Management, says the possibility to meet in person again should allow new managers that delayed fund launches last year due to the pandemic to meet with LPs later this year. Details here.

Less carbon = higher carry
EV Private Equity – formerly known as Energy Ventures – has been investing in tech businesses in and around the energy sector for nearly two decades. The firm is in market with Fund VI, according to a source with knowledge of the firm, looking for up to $350 million. This vintage is a little different from previous ones; a portion of the carry that the GP can earn is contingent on the portfolio meeting a very specific impact metric relating to decarbonisation. If the portfolio – over a 10-year horizon – doesn’t contribute a global net reduction of one million tonnes of CO2e, a portion of the carry will be diverted to buy carbon credits. New Private Markets has the details (registration required).


ESG-linked sub lines: Modern marvel or ‘meh’?
A handful of firms now have subscription credit facilities with costs linked to ESG performance. Better “non-financial” performance translates into financial reward in the form of less expensive bridge facilities. In this 14-minute podcast, four PEI editors discuss the trend.

Don’t have time to listen? Our takeaway from the conversation was that these facilities (which come in various shapes and sizes) should be a welcome innovation… but their value could be undermined by a couple of question marks:

  • Can the financial consequence of missing an ESG target really be meaningful if – as we have been told before – these facilities are relatively inexpensive?
  • Will we know whether a fund has hit or missed its targets?

Both points come down to transparency: important if these facilities can be considered more than just window-dressing.

In with the old
What do you do with an ageing portfolio company that still generates strong returns? That’s a question Andrea Auerbach, global private equity head at Cambridge Associates, hears a lot these days. One option is for a sponsor to “keep it in the family” by selling the company from an old fund to a new one. Before a sponsor goes down that path, it should make sure it is aligned with the funds’ LPs, Auerbach says. Among the questions she says need to be answered: “Are valuations being done on the up-and-up, independently, [and] what’s happening with the carry associated with that investment?” Auerbach has much more to say in this interview with affiliate publication Buyouts (registration or subscription required).

Dig deeper

Institution: Texas County and District Retirement System
Headquarters: Austin, US
AUM: $35.7 billion
Allocation to alternatives: 49.2%

Texas County & District Retirement System has confirmed $150 million-worth of private equity commitments in March, according to the pension’s recent investment activity report.

The commitments comprised of $100 million to Marblegate Partners Onshore Fund II and $50 million to Alcentra Structured Credit Opportunities Fund IV. TCDRS has previously committed $75 million to Marblegate’s maiden onshore fundAlcentra is currently in market seeking $500 million for its fourth structured credit vehicle.

The $35.7 billion US pension has a private equity target allocation of 25 percent (see below), which stands at 19.1 percent. TCDRS’s recent commitments have targeted private equity vehicles that focus on a variety of strategies, sectors and regions.

For more information on TCDRS, as well as more than 5,900 other institutions, check out the PEI database.

Today’s letter was prepared by Adam Le with Lawrence AragonToby Mitchenall and Carmela Mendoza.

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