Side Letter: Everbright’s USD hunt, Florida secondaries, Hg’s pref

China Everbright wants more USD, Hg mulls pref option, Florida SBA thanks secondaries. Here’s today's brief, for our valued subscribers only.

Just happened

Great (regulatory) wall of China

Hong Kong asset manager China Everbright is looking to boost its US dollar AUM after China tightened rules on asset management firms last year to crack down on domestic shadow banking and over-leveraging. The firm is strengthening its institutional client relationship department and is in talks with fundraising consultants and intermediaries, chief financial officer Richard Tang told PEI.

“Chinese fund institutions, as well as family offices centred around Hong Kong and Singapore, are our first source to tap into, and we are definitely seeing more opportunities in terms of USD pools from Chinese corporates,” Tang said. “We are [also] looking into a number of markets: the UK, South Korea, as well as the US, our largest [overseas] market.”

Hg gives preferred a chance

Hg became the latest blue-chip name to explore a preferred equity fund finance facility, Secondaries Investor revealed Monday. The UK mid-market firm, which has just opened a New York office, has been in discussions over a potential £500 million ($656 million; €586 million) fund-level financing for its 2013-vintage Fund 7, which would be one of the largest preferred deals yet.

Luckily for fans of quasi-debt liquidity solutions, we understand it is not the only facility of that magnitude in market. More to come on that.

Secondary to none

Florida State Board of Administration pulled in a record $1.2 billion from its private equity programme last year, largely thanks to a big secondaries sale. It also helped push the since-inception distributions to paid-in capital ratio to 1x.

In September, private equity senior investment officer James Bradley told us the pension views secondaries as a diversifier and expects to use the strategy to reposition and rebalance its portfolio. It plans to commit up to $1.5 billion to secondaries funds over the next five years.

Essentials

Impact’s $502bn wave. Impact investment assets under management broke the half-trillion-dollar mark at the end of 2018, according to a report by the Global Impact Investing Network. About half of that is accounted for by more than 800 asset managers across PE, venture, fixed income, real assets and public equities.

The survey measures “the huge traction” impact investing has gained, looking at both opportunities and the need to keep expanding due to the scale of global problems, per GIIN director of strategy Sapna Shah.

What’s next for the impact investing community? GIIN is publishing the Core Characteristics of Impact Investing on Wednesday, outlining the elements that define impact investing and distinguish it from other complementary investment approaches.

Towering above on ESG. Towerbrook Capital Partners has broken ESG ground by becoming the first private equity firm to become a Certified B Corporation. An accreditation more readily associated with social enterprises, certification involves an independently verified assessment of a company’s impact on its workers, customers, community and environment. At a time when LPs are increasingly scrutinising managers’ commitment to ESG – 86 percent see it as a consideration during fund due diligence, per our latest LP Perspectives survey – we can see other firms seeking to follow in Towerbrook’s footsteps.

Think big. On paper there’s never been a better time for general partners to diversify their investor base; limited partners are piling into the asset class and fundraising is rampant. GPs are finding their funds significantly oversubscribed as a consequence of this demand. This creates a high-class problem: the need to scale back commitment sizes or turn away investors – something at odds with building new relationships. Equistone faced this conundrum when raising its sixth flagship last year, as we explore in this fundraising case study.

Inside tip

PEI reporter Alex Lynn has recently moved from London to our Hong Kong office and is looking into Asia’s emerging pools of LP capital. He’d love to hear from you.

Dig deeper

Want more data? There are more than 6,700 institutions in our database, including Florida SBAHgChina EverbrightEquistone and Towerbrook from today’s Side Letter.

He said it

“Business should do all it can to arrest the trend toward stagnant and unequal incomes … not just to be fair or generous, but to assure perpetuation of the system that got us here.”

In his latest memo, Oaktree Capital chairman Howard Marks speaks of “responsible capitalism” as the most dependable route to prosperity.


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Today’s letter was prepared by Isobel MarkhamAdam LeCarmela MendozaRod JamesAlex Lynn and Preeti Singh.


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