Side Letter: Carlyle’s fundraising update; Korean LP appetite; PEI Awards deadline

Carlyle is making "good progress" on the hunt for a replacement CEO. Plus: a Korean insurer doubles its alts target; and EQT raises Europe's largest early-stage VC tech fund. Here’s today's brief, for our valued subscribers only.

Just happened

Korea-ring into a higher alts target (Source: Getty)

More PE? Yes please!
Just as Side Letter was going to press this morning, PEI Hong Kong bureau chief Alex Lynn filed a story on Korean insurer DGB Life Insurance that shows how some institutional investors still have a voracious appetite for private equity and alternatives, at a time when rising interest rates are making fixed income look for some like a better bet on the risk-reward spectrum. DGB, which has around $5.9 billion in assets, plans to nearly double its alternatives exposure to 15 percent over the next three-to-four years, chief investment officer Byung-kyu Cheon told Alex on the sidelines of Tuesday’s Private Debt Investor: Seoul Forum. The insurer is also planning to make its first commitment to a secondaries fund next year, Cheon added. Read Alex’s story here.

Tough fundraising times
The drop in The Carlyle Group’s quarter-on-quarter fundraising is not due to its hunt for a new chief executive, interim CEO Bill Conway said on the firm’s latest earnings call yesterday. Conway doesn’t see “any long-term damage at all”, adding that the firm’s investors “like seeing somebody at the top who they know understand exactly what they’re trying to accomplish”. The firm’s board and search committee are “making good progress finding the right leader”, he added.

Carlyle reported weaker fundraising in the quarter compared with its peers, gathering $6 billion across all strategies – a drop from $9.8 billion from the second quarter – versus KKR’s $13 billion and Blackstone’s $45 billion. Pete Clare, CIO for corporate private equity, noted on the call accompanying its earnings results that tough economic times and market congestion are driving the decrease in inflows, especially for large buyouts. Nevertheless, he expects all of Carlyle’s PE funds in market will raise capital similar to the current vintages.

Presumably, this would in include its eighth buyout fund, which is seeking up to $22 billion. The firm had raised $14 billion for the vehicle as of end-September, just slightly more than the $13.6 billion committed as of end-June. A boost to this fundraising could be around the corner – Carlyle was running what’s known as a tender offer process as of early October to let LPs in its previous flagship fund cash out, at a time when many LPs need to free up liquidity for re-ups, our colleagues at Buyouts reported (registration required).

Venturing into tech
EQT Ventures, the venture capital arm of Northern European investment firm EQT, has closed Europe’s largest VC fund focusing on early-stage tech start-ups, per a statement. EQT Ventures III amassed €1.1 billion of total commitments and will make investments of between €1 million and €50 million in European and North American founder-led tech start-ups. The closing – which comes shortly after the September wrap-up of EQT‘s Growth I fund on €2.4 billion – is evidence of investors’ continuing interest in tech-focused funds, in spite of the declining tech valuations seen across public markets for the majority of 2022.

The 2022 VCJ 50 ranking of the largest VC funds in market compiled by our colleagues at Venture Capital Journal (registration required) found that macro headwinds, including reduced tech valuations and an impending recession, have had little effect on the VC market. In fact, some of the biggest funds ever have closed in the past 11 months, helping 2022 become the second-highest fundraising year. Celebrations may soon be cut short, with sources saying the denominator effect very much remains a factor in their investment decisions; this could lead to lower commitments in 2023. HarbourVest Partners managing director Scott Voss tells VCJ: “Our coffer is full, and that capital in that fund will last us for three years or so. So, we’re just going to be very disciplined in how we deploy that capital.”

Essentials

PEI Awards – three days to go!
Submissions are coming in thick and fast for the PEI Awards 2022. With 74 categories up for grabs this year, including two newly minted categories of Sports-Focused Private Equity Firm of the Year and GP-Stakes Firm of the Year, there’s never been a better time to let us know who deserves to be shortlisted. Nominations close this Friday. Details here.

Dig deeper

Institution: Employees Retirement System of TexasHeadquarters: Austin, USAUM: $33.9 billionAllocations to alternatives: 38.9%

Employees Retirement System of Texas (ERS) has made a €45 million commitment to Hg Genesis 10, according to its latest board meeting.

ERS is overallocated to private equity, with 19.7 percent exposure to the asset class, above its 16 percent target. The value of the portfolio is $6.68 billion.

The pension’s recent fund commitments are predominately focused on funds targeting Western European vehicles with a buyout focus.

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


Today’s letter was prepared by Adam LeCarmela Mendoza and Helen de Beer