Side Letter: Covid-19 updates, Aussie super mergers, LP relations in a crisis

Australian pension funds are merging for the sake of scale; what are the implications for managers? Also: here are the questions we want to answer in the coming days and weeks. Here’s today's brief, for our valued subscribers only.

Just happened

Ill communication

At times like this, the tone of GP-LP communication is very important. “Do they think we’re stupid?”, one senior executive at a public institution in North America asked us last week, noting that some “wilfully ignorant” managers were seemed to be trying to de-risk by syndicating stakes in a big investment signed at – what now looks like – an overpriced valuation. Said the investor: “Co-investment dealflow is already starting to fizzle out as deal activity slows, but we’ve also had to turn down a lot of mispriced opportunities. We’ll still consider them but we’re looking at each opportunity with eyes wide open right now.”

In other covid-19 news:

A Super idea

Australia map

With First State Super and VicSuper merging to create Australia’s second-largest superfund this year, and several other mergers recently completed or under consideration, what will the sector look like in the near future and what will it mean for superfunds’ relationships with external fund managers? “I do think [the LP/GP relationship] needs to evolve – fees are a part of it, but there are other considerations,” Damien Webb, head of income and real assets at First State Super, tells Infrastucture Investor‘s Daniel Kemp. Read the deep dive here.

Arise king cash

Dust off the old phrase “cash is king” – it is about to get a lot of use. Last week Eurazeo reported that at the end 2019 it had €533 million in cash and cash equivalents and a recently renewed five-year undrawn credit facility of €1.5 billion and no debt on its balance sheet. The firm is “well equipped to deal with the economic uncertainties linked to the Covid-19 outbreak and seize potential opportunities that may arise,” said chief executive Virginie Morgon.

On our minds right now

Our editorial team will try to answer a number of questions in the coming days and weeks and would value your input (as ever). Among them:

  • Can you make a $50 million commitment over Skype?
  • Will the denominator effect force secondaries sales?
  • LPs, how do you rate the quality of the information you are getting from GPs?
  • GPs: how are you approaching cash management?
  • Where are the brightest red flags in your portfolio?
  • How is the trading uncertainty and stock turmoil going to feed through to the next quarter’s NAVs?

If you want to share a view, please email

He said it

“I like to say it’s the highest calling of mankind, but nobody agrees.”

In an interview with the New York Times, Carlyle co-founder David Rubenstein ruminates on why private equity is the subject of criticism.


Toys ‘R’ Us is the buyout-gone-bad that just won’t leave former owners Bain CapitalKKR and Vornado Realty Trust alone: a bankruptcy trust for creditors who lost money in the bankruptcy sued them and former chief executive David Brandon alleging they siphoned money out before the company went under, per the Wall Street Journal (paywall).

Real reorganisation. Our senior editor for real estate Jonathan Brasse reflects on moves by two of the world’s biggest insurers – Allianz and AXA – to consildate their real asset investment capabilities.

Direct benefits. OpTrust, a C$22 billion ($16 billion; €14 billion) Canadian pension, looks like it is reaping the benefits of pivoting its portfolio towards directs; it earned a 24.7 net return from its PE portfolio in 2019, according to its results, notes Buyouts’ Kirk Falconer.

Dig deeper

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

We would love your feedback to help us make this newsletter more useful; click here to give us your opinion.

Today’s letter was prepared by Toby MitchenallIsobel MarkhamJonathan BrasseCarmela Mendoza and Alex Lynn.

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