Side Letter: CD&R’s $15bn; Ham Lane’s co-invest close; Spain’s carry exemption

Clayton, Dubilier & Rice is defying a fundraising slowdown with its latest flagship. Plus: Hamilton Lane has closed its latest co-investment vehicle and Spain is enticing private equity talent with its new carried interest tax treatment. Here’s today's brief, for our valued subscribers only.

Just happened

CD&R: Well on its way to $20 billion (Source: Getty)

CD&R’s pedigree
If the past year has been challenging for private equity fundraising, no one appears to have informed Clayton, Dubilier & Rice. The firm had already collected $15 billion of the $20 billion target it has set for its Fund XII as of December, our colleagues at Buyouts report (registration required). Sources told Buyouts that Fund XII, which launched last May, is expected to wrap up in the spring.

As the PE industry navigates high inflation, soaring interest rates and LP capacity constraints, CD&R’s seemingly smooth fundraise is all the more impressive. Sources told Buyouts that the firm has retained an edge over its competitors during this environment because of its longstanding record of “managing portfolio assets in tough times”. Such pedigree will clearly be in high demand as fundraising and macroeconomic pressures spill over into 2023.

Ham Lane’s co-invest cash
Hamilton Lane has closed its latest co-investment fund on $2.1 billion, according to a Wednesday statement. Hamilton Lane Equity Opportunities Fund V came to market in mid-2020 and has become the firm’s largest of its kind. Its previous co-investment fund closed on $1.7 billion in 2019. Fund V falls within Hamilton Lane’s direct equity platform, which has raised approximately $3.7 billion since the latest vehicle launched. The $13 billion platform includes commingled co-investment funds and discretionary separate accounts.

Spanish carry
Carried interest in Spain is now taxed mainly as plain.. .old employment income (hey, we’re trying our best!). The country’s Start-ups Law, which came into effect on 1 January, sees carry taxed as employment income rather than capital gains, and introduces a 50 percent exemption based on the following requirements:

  • The Spanish resident individual is a director, employee and/or manager of closed-end alternative-investment funds, including VC funds, PE funds, European social entrepreneurship funds, European Long-Term Investment Funds or similar entities.
  • A minimum return must be guaranteed and defined in the articles of association or regulations of the investment entity.
  • Shares or rights must be held for a minimum of five years, unless they are redeemed or become “ineffective” or are totally or partially forfeited as a consequence of a change in the managing entity.

The law is designed to encourage start-up creation and investment in the country. Posting on LinkedIn, Rogelio Fernandez, senior counsel for Spain’s Alter Legal and former head of legal APAC for Partners Group, called the development “excellent news for private fund managers”, adding that it will “make the Spanish market even more attractive for private equity executives”.

Essentials

Dry powder: Drying up?
Strong secondaries activity may have considerably eaten into the capital available to deploy into transactions last year. That’s according to Coller Capital‘s founder and chief investment officer, Jeremy Coller. Though secondaries fundraising has proven robust of late, a flurry of activity expected in the second half of last year should have been “sufficient to absorb most of the current stock of ‘dry powder’”, Coller wrote in July for the firm’s latest Annual Report and Financial Statements, which was filed in the UK on 30 December and digested by our colleagues at Secondaries Investor (registration required).

Coller reiterated the point in a Secondaries Investor podcast in December, saying the biggest threat that could put a dampener on the market was an “easy” question to answer: fundraising. “We do about 1 percent of our dealflow so that’s an enormous amount of investment opportunity left on the table,” Coller said. In his letter, Coller said private credit continues to be one of the most dynamic areas of private markets, adding that LPs are increasingly likely to tap the secondaries market to reposition their credit portfolio, leading to strong growth in that field.

MUFG’s fund finance innovator
MUFG Investor Service has appointed Fi Dinh as head of fund finance for the APAC region, per a Wednesday statement. Dinh has developed a reputation in APAC as something of a fund finance innovator, having led ING’s first ESG-linked revolving credit facility back in 2019. Dinh spent three years at ING, where she was tasked with starting and building the fund and insurance finance business in APAC. She moved to Citi in 2021 and was named ESG lead for its global fund finance products. At MUFG, she will be responsible for building the fund finance franchise across APAC, and supporting the growth of the asset servicing and fund administration business globally.

Dig deeper

Institution: Fubon Life InsuranceHeadquarters: Taipei, TaiwanAUM: NT$4.68 trillion ($152.5 billion; €143.2 billion) 

Fubon Life Insurance has committed $60 million to Vivo Capital Fund X and €65 million to EQT X.

The Taiwanese insurer’s recent private equity commitments have focused on buyout, venture capital, secondaries and growth strategies in North America, Europe and Asia-Pacific regions.

For more information on Fubon Life Insurance, 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 Helen de Beer.