Side Letter: CVC’s Penn SERS commitment, First State Super’s liquidity, CD&R’s $6bn

Could a source of mild annoyance to LPs in a bull market turn into a sticking point in a post-covid-19 environment? Here’s today's brief, for our valued subscribers only.

She said it

“Even PE shops that haven’t looked at purchasing debt as an asset class before are getting interested.”

Jocelyn Hirsch, partner at Kirkland & Ellis in Chicago, explains one of the reasons why GPs are tapping alternative sources of debt finance in an article on sister title Private Funds CFO.

Just happened

LP: ‘Why are you raising your next fund now?’

Penn State Treasurer Joe Torsella (remember him?) has looked at a widespread market practice and asked why it’s still happening now. The practice in question is top-flight GPs raising flagship funds early and keeping them, unactivated, on ice until the current fund is fully invested. CVC Capital Partners is currently marketing an €18 billion fund, which it doesn’t expect to activate until the first half of 2021, said Chris Stadler, managing partner at CVC, at a Pennsylvania State Employees’ Retirement System meeting yesterday.

“I’m […] failing to see the argument for how an investment in your new fund in fact is an investment in opportunities that are out there at this moment,” Torsella said. “It seems to be, it’s more investments in opportunities that will be there in three years.”

Our conversations always suggested this was an occasional annoyance for investors rather than a source of total outrage. After all, it’s in their interest for the fund to be ready to deploy when needed, even if it involves making commitments some way in advance of investment activity. The fact these funds continue to get raised supports that. Indeed, Penn SERS’ board approved a €50 million pledge to Fund VIII yesterday. With investors focused on two things in the current climate: their own liquidity and opportunities arising from the crisis, we may hear this question asked again.

First State Super poised

While some large institutions fret over potential liquidity issues, Australia’s First State Super is on the hunt for opportunities linked to market dislocation. In an interview with PEI, CIO Damian Graham says the A$96 billion ($61 billion; €56 billion) fund has maintained an ample supply of “especially liquid-liquid assets”, namely cash and bonds, so it’s well-placed to handle a wave of drawdowns sparked by the coronavirus pandemic. Although FSS is currently above its target PE allocation, Graham notes the fund’s liquidity buffer means it could be “a little bit opportunistic” if pricing begins to mimic the public markets.

He said it

“The market has clearly tightened, which bodes well for this new fund.”

Hamish Buckland, chairman of CVC Credit Partners, toasts the $657 million it has raised for its second-generation US direct lending fund. Sister title Private Debt Investorhas the scoop.


US VC activity broke records in Q1. Despite the unfolding covid-19 pandemic, early-stage venture forged full steam ahead in Q1. Deal count and funding were down slightly, writes Rebecca Szkutak on Venture Capital Journal, but the median deal size was its highest ever.

CD&R gathers $6 billion. The firm known as a pioneer of operational improvement has held an interim close on $6 billion for its latest fund, reports Buyouts Chris Witkowsky: “The pool is expected to reach about $10 billion by early May, according to a person familiar with the Fund XI documents. Fund XI is expected to ultimately raise $13 billion, the person said.”

Dig deeper

Institution: Public School and Education Employee Retirement Systems of Missouri
Headquarters: Jefferson, United States
AUM: $42.23bn
Allocation to alternatives: 25.04%
Bitesize: $10m-$50m

The Public School and Education Employee Retirement Systems of Missouri has boosted its target allocation to private markets assets from 25.0 percent to 35.0 percent of its total investment portfolio, according to the pension’s April 2020 board meeting minutes. The aim is for PSRS/PEERS to reach its desired private markets target allocation by the end of 2020.

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

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 MarkhamAdam LeAlex Lynn, and Rebecca Szkutak.

Subscribe now and get Side Letter delivered to your inbox each day

To find out how, email, or call our team:

London: +44 207 566 5432
New York: +1 646 545 6296
Hong Kong: +852 2153 3140