Side Letter: Eurazeo’s strip sale, Brookfield eyes secondaries, Arizona’s shake-up
Got a sizeable balance sheet and want to help your fundraise over the line? Use a secondaries 'strip sale'. Here’s today's brief, for our valued subscribers only.
Paris-headquartered Eurazeo is the latest firm to use the secondaries market to give its fundraising a boost. The firm moved a strip of five assets off its balance sheet into a vehicle backed by Lexington Partners and others. The assets were then used to seed mid-market-focused Eurazeo Capital IV, which held final close on €700 million in July. The syndicate also made a stapled commitment to the fund. Expect to see more such deals this year – strip sales accounted for 34 percent of GP-led transactions by value last year, more than restructurings or tender offers, according to Campbell Lutyens.
Brookfield explores secondaries
Speaking of secondaries, Brookfield has become the latest asset manager to eye an entry into the buyside of this market, sister title Buyouts is reporting. The Canadian giant recently explored buying a secondaries firm and approached at least one manager which was ultimately not interested in selling. It’s surprising that more large asset managers haven’t already added secondaries to their capabilities. Of the 10 largest firms according to the PEI 300, only Blackstone, Carlyle and Neuberger Berman have secondaries businesses. For a market that’s grown seven-fold over the last decade, you’d expect more managers to be keen to get a slice of the pie. Thoughts on this? Let us know.
Mark Steed
Arizona shakes up private markets
Arizona Public Safety Personnel Retirement System is overhauling its private markets portfolio, combining private equity, real estate and real assets into a single alternative assets pool and cutting down its manager relationships. CIO Mark Steed (pictured) describes the process of trimming the portfolio as a “cold, clinical review” of who the pension system considers is adding value and is a good partner. One of the drivers behind the cull: decade-long growth across the board resulting in “the type of wealth and hubris that creates conflicts of interest and economic misalignment between parties”, according to Arizona documents.
Essentials
Platinum gets green light.Pennsylvania Public School Employees’ Retirement System board has voted to approve a $300 million commitment to Platinum Equity Capital Partners Fund V after previously postponing the vote over ESG concerns. Platinum partner Mark Barnhill explained to the board the firm’s investment in Securus, which manages inmate phone systems for multiple state prison systems, including the Pennsylvania Department of Corrections. “PSERS’ board felt that our advisory seat [on Platinum’s advisory board] could give us the ability to influence the direction of Platinum and the companies that could become part of the new fund,” a PSERS spokesman told us.
More Abraaj courtroom drama. Last week a UAE court sentenced Abraaj founder and CEO Arif Naqvi to three years in prison in absentia for siphoning off money from airline Air Arabia, according to several media reports. Naqvi was on the airline’s board and allegedly used the money to cover shortfalls in one of Abraaj’s funds. Consequently, Air Arabia posted a full-year loss after booking impairments to cover its $336 million exposure to Abraaj.
“Predatory and destructive activity like looting assets, hiding fees and strategically using bankruptcy without regard for the well-being of workers is perfectly legal.”
Michael Frerichs and Joe Torsella, Illinois and Pennsylvania’s respective state treasurers, argue that private equity is dangerously under-regulated in an op-ed on Sunday.
We would love your feedback to help us make this newsletter more useful; click here to give us your opinion.