Side Letter: Clearlake’s $7bn, Investcorp’s GP interests unit, Brookfield’s retail rescue

With $7bn committed and a flexible mandate Clearlake is sitting pretty. Plus: LP appetites, Investcorp's GP interest business and Brookfield's PE-RE play. Here’s today's brief, for our valued subscribers only.

Just happened

Clear opportunity

It’s a good time to have a flexible investment strategy. Clearlake Capital Group, which just closed its latest flagship fund on $7 billion – pretty much twice the size of its predecessor – has deployed more than $1.3 billion since March, mainly in secondary credit opportunities. Co-founder and managing partner José Feliciano (pictured) talked us through the fundraise and game plan for deploying the new fund. Here are some takeaways:

  • Most of the fundraise (including face-to-face meetings) took place late last year. The firm gave “LPs more time at the end, to be able to process the documents, side letters, etc”.
  • The fund is targeting 25 percent-plus gross returns for targeted investments over typical hold periods of three to five years, according to pension fund documents from the Pennsylvania Public Schools Employees’ Retirement System, which committed $200 million to the fund.
  • Over the six-year investment period of the fund, Feliciano sees it focusing initially on “secondary market stressed and distressed opportunities, as well as more special situations in general” then moving back to buyouts as the underlying economy and capital markets return.

The LP strategy shift

Any wonder managers like Clearlake (above) are finding willing backers? There are only two private markets strategies for which LP appetite is increasing, according to a survey by Probitas Partners: special sits and secondaries. According to the San Francisco-based placement agent’s report, 55 percent of respondents – a sample size of 79 global LPs – said in April that they are interested in exposure to distressed debt or special situations investment strategies (a 19 percent increase compared with the same time last year). Interest in secondaries investments also increased to 67 percent from 58 percent. Read more here.

Investcorp makes headway

Multi-strategy manager Investcorp has held a first close on its debut GP interests fund (Investcorp Strategic Capital Partners), according to a report on Reuters, which says $160 million has been raised. Investcorp declined to comment on the report. There is still some way to go before it reaches its $750 million target, but if successful the firm would join a relatively small group of firms investing in what continues to be an attractive market. In late March Private Equity International‘s Alex Lynn spoke to two old-timers in this niche – Dyal Capital Partners and Rosemont Investment Group – to ask how the strategy would hold up in the covid-19 era.

He said it

“When the world gets turned upside down like it has, you really have to assess your business, and see how the situation is impacting your clients, which leads you to find potential exposures and risks that otherwise typically wouldn’t exist.”

Matthew Hallgren, new CFO at advisory business Erie Street, tells sister title Private Funds CFO about his first month on the job.

Essentials

Secondaries tools for downturn. How can GP-led secondaries and preferred equity help GPs during the covid-19-induced downturn? That’s the subject of discussion in a free webinar hosted by Cebile Capital and moderated by our senior editor Adam Le this Wednesday. Experts from Coller Capital, Whitehorse Liquidity Partners, Cebile and Weil, Gotshal & Manges will discuss how the use of continuation vehicles and fund-level preferred equity can generate liquidity in funds and GP management companies. Registration and details here.

$5 billion RE-PE retail play. Brookfield Asset Management will provide $5 billion to large retailers battered by the lockdown. In summary: Brookfield will make non-control investments in medium-sized retail businesses operating for at least two years and with pre-pandemic revenue of $250 million or greater. The profile describes many tenants in the firm’s real estate operation, Brian Kingston, CEO of Brookfield Property Partners, said in a Q1 2020 earnings webcast, but recipients don’t need to be Brookfield tenants. The $5 billion in funding will come from the balance sheet and “private pools”, a spokesperson told sister title Buyouts, and responsibility for the programme will be split across different Brookfield units (including both PE and real estate). Subscribers to Buyouts can read the full story here.

Inside tip

What would you like our reporters to dig into? We’d love to hear from you.

Dig deeper

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


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Today’s letter was prepared by Toby MitchenallIsobel Markham, Adam Le, Rod James, Carmela Mendoza and Alex Lynn.


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