Side Letter: Co-investment deep dive, Caspersen freed, buy-and-build record

Does co-investment deliver alpha? Plus, GP-led restructurings expert leaves prison and PE firms a little shy on disclosing expensive add-ons. Here’s today's brief, for our valued subscribers only.

Just happened

Is co-investment the answer?

The first in our new Deep Insight series looks at whether co-investment is the way to get the best out of private markets – and whether it’s riskier for LPs than it seems. Considered by many an “unofficial fee break” and an “alpha generator”, the rapacious appetite for co-investment is showing no sign of abating: Cambridge Associates estimates co-investments make up around one-fifth of total market activity. We delve into juicy performance data, weigh up what it takes to be a reliable investment partner and investigate the risks involved.

First up: how are LPs accessing co-investing and is it delivering alpha?

Focus on Africa

Edmond de Rothschild Private Equity and Africa-focused Amethis have held a €375 million final close on their latest and largest vehicle for the continent. The firms launched the vehicle this year and exceeded their original target by €75 million. Fund II had a high re-up rate with more family office and institutional LPs alongside DFIs. EdR PE and Amethis are set to hit the fundraising trail again late this year with their fifth Africa vehicle. It’ll be a smaller fund (the target is €150 million) targeting investments in Morocco, Egypt and Jordan.

Caspersen’s out

Andrew Caspersen, the Park Hill fund restructurings expert jailed in 2017 for attempting to defraud investors out of $95 million, is out of prison and counting down his days to final release in a halfway house in Brooklyn. The case rocked the private equity and financial services world with SEC private equity unit co-head Igor Rozenblit blaming the “complicated and opaque” fund restructurings industry for providing Caspersen with the perfect cover. We’re not sure the industry has fully learned its lessons from the case but there are signs its head is in the right place, as sister title Secondaries Investor writes.


Buyer’s remorse? The average PE add-on value in Europe more than doubled last year to a record £164 million ($208 million; €184 million), according to Silverfleet Capital’s latest European Buy & Build Monitor. It’s not competition for assets but firms being more reluctant to disclose their deal values, with the total number of add-ons larger than €67 million more than halving last year, the report notes. Our takeaway: everyone loves showing off a bargain, expensive assets not so much.

This Financial Times long read (paywall) looks at how Kirkland & Ellis harnessed the upward trajectory of the private equity industry to become the world’s biggest law firm. K&E shifted from a 50:50 litigation and transactions split a decade ago to deal-related fees accounting for more than three-quarters of revenue. Part of its success stems from its entrepreneurial model – which, as the piece suggests, is not for everyone.

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

Inside tip

It’s Invest Europe’s CFO Forum 2019 in Valencia tomorrow and Wednesday and senior reporter Rod James will be there. Drop him a line if you’ll be there and fancy catching up on the latest industry gossip.

Dig deeper

Texas County and District Retirement System has agreed to commit $90 million to TA XIII, TA Associates’ 13th growth equity fund, which will invest in North America and western Europe. Here’s a breakdown of the $29 billion US pension’s investment portfolio. For more information on TCDRS and more than 6,700 other institutions, check out the PEI database.

They said it

“They say, ‘Here’s an office, here are your phones, hire who you want, good luck and don’t screw up’. You have to back yourself. Of course, if it doesn’t work out, you face the consequences.”

A former Kirkland & Ellis partner describes to the FT the level of autonomy granted by the firm.

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Today’s letter was prepared by Adam LeIsobel MarkhamCarmela Mendoza and Sheikh Jahan.

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