Side Letter: Carry’s seven problems, Europe recession fears, secondaries stars

Allocating carried interest is not a straightforward exercise, as Simon Havers from executive search firm Odgers Berndtson explains below. Here’s today's brief, for our valued subscribers only.

Just happened

Where does all the carry go?

Carried interest allocation is not without its challenges. In fact, Simon Havers of executive search firm Odgers Berndtson has detailed for us seven reasons it’s problematic. Besides the dollars and cents of it, this is an issue worth taking seriously: PE and VC execs who feel carry is not distributed in a fair and rational manner (or are shut out of the carry pool altogether) are unlikely to stay for long. If you recognise your own firm in any of these seven, it may be time for a rethink.

Europe recession fears

BMO Private Equity Trust, a £287 million ($351 million; €316 million) NAV investment company, is bearish on Europe’s future. The London-listed trust posted £25 million of total realisations and income in H1 2019, down from £30 million at the same point last year, according to its interim report. New investments also dropped to £28 million from £41 million in H1 2018. Investment manager Hamish Mair said the UK and Germany faced a “real risk” of recession with no resolution in sight to the Brexit impasse.

Secondaries’ brightest stars

The wait is almost over: later this week we will be revealing our Young Guns of Secondaries 2019, the fourth instalment of our list of the most impressive industry professionals under 36. As the secondaries market continues to evolve, these are the people who’ll be seeing it through its next iteration – in fact, many of them are driving its evolution today. Here’s an inside look at the make-up of this year’s list.

Essentials

Counting on PE to ‘plug the gap’. Illinois Municipal Retirement Fund is relying on private equity to help it reach its assumed rate of return 7.25 percent, chief investment officer Dhvani Shah tells us. “Based on capital market assumptions, other asset classes will help us realise 6.8 percent: alternatives have to plug that gap.” In an exclusive interview, Shah tells us how the pension plan has designed its private equity programme to do just that.

LP meetings. It’s Tuesday, so here are some LP meetings to watch out for this week.

Inside tip

Have news or views you’d like to share with us, on this or else? We’d love to hear from you.

Dig deeper

Tar Heel Treasury opens up to PE. North Carolina State Treasury has confirmed a $300 million commitment to EIG Energy Fund XVII. Here’s a breakdown of the $102 billion US public pension’s total investment portfolio. For more information on North Carolina, as well as more than 5,900 other institutions, check out the PEI database.

He said it

“It is crucial for us to understand the accurate size and risk associated with our outstanding commitments, not least in a situation where this world isn’t going to be as rosy as it has been lately.”

ATP Private Equity Partners managing partner Torben Vangstrup tells PEI why his unit is getting more granular on GP credit line use.


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Today’s letter was prepared by Isobel MarkhamAlex Lynn and Preeti Singh.


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