Side Letter: Carlyle’s IR boss loss; PE’s past performance predictors

Carlyle's global head of IR is set to depart after this year. Plus: Why past performance can be a useful indicator for investors; and a rundown of the FCA's priorities for regulating alternatives managers. Here's today's brief, for our valued subscribers only.

Just happened

Carlyle’s Urquhart: Moving to pastures new after this year (Source: Carlyle)

Carlyle’s IR boss loss
Just days after The Carlyle Group confirmed that its chief executive Kewsong Lee had suddenly resigned came an announcement this week that Nathan Urquhart, its global head of investor relations, would also be leaving the firm. Urquhart plans to pursue new opportunities professionally and will remain through year-end to help senior leadership with the transition, per a statement.

Urquhart, who is also a partner, has not been long in the role: he joined in 2019 to head the credit platform’s global investor relations after an 11-year spell at Och-Ziff Capital Management and was promoted to his present position the following year. He is replaced by David McCann, who was named interim head of global investor relations, effective Wednesday. Toronto-based McCann was previously senior relationship manager responsible for overseeing investor relations in North America.

Though the timing of the announcement may seem a little inconvenient, given that it coincides with Lee’s departure, a source close to the matter says Urquhart’s move has been in the works for months and is unrelated to the chief executive shake-up this week. Carlyle declined to comment. Nevertheless, this latest development caps a week of difficult news for the firm. Investors aren’t known for their love of change, and will no doubt be watching these leadership transitions closely.

Forward-looking statements
“Past performance is not a reliable indicator of future results” is a phrase we often hear in PE, but just how accurate is it? Research from Schroders Capital suggests that performance can, in fact, be more instructive in some segments of the market than others. In an analysis of 3,512 funds raised since 1980, Schroders found that 36 percent of those in the top quartile for one vintage were also top quartile for its successor, and 64 percent were in the top two quartiles.

Notably, good performance persistence was greatest among small funds and strong among medium-sized funds, but weak among large ones. Perhaps unsurprisingly, a GP with a bottom quartile fund was likely to remain bottom quartile with their next fund. The past may not be a guarantor of future success, but it certainly shouldn’t be ignored.

UK regulation rundown
The UK’s Financial Conduct Authority is taking more steps to oversee how alternatives firms operate. Its updated supervisory strategy, published on Tuesday, outlines their priorities for firms, the main risks posed to investors and areas where improvements can be made. Here’s a rundown:

Firms with alternatives products targeting retail clients will need to:

  • Ensure these are only offered to appropriate investor types, and that the investments meet client needs
  • Consider the relevant marketing, distribution, communication and sales for these clients
  • Ensure that target markets are clearly outlined for distribution channels
  • Ensure their processes are effective, including the procedures for checking that elective professional investors meet the quantitative and qualitative tests required under the FCA’s rulebook.

With regards to conflicts of interest, firms will need to adequately manage these fairly and in a manner that minimises harm to investors, such as in situations where “firms have bypassed their own processes to make sales or increase AUM”. Meanwhile, the FCA has warned that it will scrutinise ESG claims made by hedge funds and PE firms. Sponsors offering such products should expect to be subject to review to ensure marketing materials accurately describe their product, with funds offering clear and consistent disclosure. More on that here from our colleagues at Responsible Investor (registration required).


Marketers on the move
With GPs finding it such a challenge to attract LP eyeballs in 2022, it’s perhaps little surprise that marketers are in high demand. Alternatives-focused executive search firm Jensen Partners tracked 845 marketing hires in the second quarter, a modest decrease on the first three months of the year but up nearly 50 percent compared with the same period last year. PE was the most active asset class for new hires in the second quarters, with 184 moves recorded. More than half the overall alternatives moves in the period were recorded as diverse, with a total of 327 female marketing professionals and 109 male BIPOC (black, indigenous and people of colour) professionals switching role.

Dig deeper

Institution: Yellow UmbrellaHeadquarters: Seoul, South KoreaAUM: 17.74 trillion Korean wonAllocation to alternatives: 23.46%

Yellow Umbrella has issued a request for proposals from domestic private equity fund managers.

The fund plans to commit a total of 260 billion Korean won ($199 million; €194 million) to at most eight private equity managers. Of the total, 240 billion Korean won will be split between six established PE managers, while 20 billion Korean won will go to at most two smaller firms. Eligible managers must possess at least five years of experience in the private equity industry.

The submission deadline is 26 August 2022, with a decision put to the investment committee planned in mid-November.

The 17.74 trillion won pension has a 23.46 percent allocation to alternative investments.

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

Today’s letter was prepared by Alex Lynn with Carmela Mendoza and Madeleine Farman.