Side Letter: CPPIB’s about-turn; Hyundai’s re-up reflections; Adams Street survey

CPPIB is adjusting how it accesses concentrated exposure to PE-backed companies. Plus: How a $35 billion Korean insurer is approaching re-ups in a frenetic fundraising year and findings from Adams Street's latest LP survey. Here's today's brief, for our valued subscribers only.

Just happened

CPPIB to back single-asset secondaries
CPP Investments is changing tack on how it wants to access concentrated exposure to high-quality PE-backed companies. The C$550.4 billion ($432.8 billion; €393.5 billion) pension giant will start investing in so-called single-asset secondaries deals – GP-led processes that typically involve moving one prized asset out of an existing fund and into a continuation vehicle, London-based managing director Dushy Sivanithy tells Side Letter. The pension plans to deploy up to $1 billion a year via the strategy.

The move is significant for the Canadian pension, which had until late last year avoided such deals and instead accessed concentrated exposure in single companies via direct co-investments, which typically don’t charge fees or carry. But with single-asset deals becoming the fastest growing segment of the GP-led secondaries market and with sponsors including Clayton, Dubilier & RiceKKR and Insight Partners using such deals to hold on to prized assets, CPPIB’s about-turn is a no-brainer.

The pension will back deals even if it doesn’t have an existing relationship with the GP running the process, Sivanithy adds. With the world’s largest investor in private equity now an active player in this market, in addition to its ability to make fund commitments as part of these deals, we suspect CPPIB’s phones are going to be ringing off the hook.

Read all about single-asset deals in PEI’s GP-led Secondaries Special Report.

When not to re-up
Are you a Western GP hoping to expand your LP base at a time when existing investors are struggling to find capacity for every re-up on their plate? Enter: Hyundai Marine & Fire Insurance (HDMF), a South Korean institution with $35 billion of AUM and a 25 percent allocation to alternatives, roughly one-quarter of which is in PE.

HDMF is one of the few LPs these days with both the desire and resources to build new GP relationships, and it is on the hunt for either buyouts, growth or venture capital, PEI reports this morning. Although, like many of its peers, HDMF is inundated with re-ups, senior manager Innchul Oh is willing to take a pragmatic approach to ensure the institution participates in the best opportunities.

“It is very hard to invest with new GPs because we already have a huge portfolio, so we should consider our existing GP relationships,” Oh says, noting that on rare occasions, the institution will decline to back an existing relationship “I do not want to invest more if GPs do not make their target returns or if there was a huge turnover in their investment professionals or huge changes in their ownership structure.” Read the full interview here.


Asia’s appeal
Given EQT’s acquisition of Baring Private Equity Asia this morning (ICYMI: find our coverage here), it is fitting that almost half of institutional investors believe Asia-Pacific boasts the best investment potential for 2022. That’s according to the latest global institutional investor survey from Adams Street Partners. Driving factors behind Asia’s appeal include the region’s lower valuations and long-term growth potential relative to other markets. Here are some other notable takeaways:

  • North America and Europe are roughly equal in terms of investor interest, with the latter’s greater potential for buyouts and venture deals highlighted as a draw
  • Investors are most bullish on financial services, tech and healthcare
  • Inflation, interest rate hikes and hefty capital inflows into the asset class are the top concerns (NB: the survey was completed prior to this year’s geopolitical turmoil)
  • Eighty-six percent are confident private markets will outperform their public market equivalents over the long term

Inflexion point
London PE stalwart Inflexion has made 100 investments since inception in 1999, per a Wednesday statement. The landmark follows a record year in 2021, which saw eight exits, 12 new investments and 97 add-ons. The firm has also completed four new investments this year, and exited online learning business Alcumus for a 5.9x and its largest cash return to date. Of its 100 acquisitions, 45 have been realised, achieving a 3.5x weighted average return.

Dig deeper

Institution: Los Angeles County Employees’ Retirement Association
Headquarters: Pasadena, US
AUM: $75.58 billion
Allocation to alternatives: 28.8%

Los Angeles County Employees’ Retirement Association has approved $250 million in commitments across three private equity funds, according to a March investment board meeting document.

The pension committed $50 million to Thoma Bravo Discover Fund IV and $100 million to both AE Industrial Partners III and Thoma Bravo XV.

LACERA’s exposure to private equity sits at 14.7 percent, less than its 17 percent target allocation. The US public pension’s recent private equity commitments have concentrated on consumer goods, TMT and diversified sector funds focused on North American vehicles.

For more information on LACERA, as well as more than 5,900 other institutions, check out the PEI database.

Today’s letter was prepared by Alex Lynn with Adam Le and Carmela Mendoza