Side Letter: Ex-Abraaj team’s return; PE’s operating onus; Qiming’s China haul

A firm led by a former Abraaj team is making a second attempt at launching its next fund. Plus: Key takeaways from PEI Group's Operating Partners Forum and Impact Investor Global Summit. Here’s today's brief, for our valued subscribers only.

Just happened

RMBV: seeking $300 million for North African PE (Source: Getty)

Water under Abraaj?
What do you get when mixing an extremely challenging fundraising environment, an emerging markets focus and a (sort of) newly independent manager with an association to one of private equity’s most high-profile collapses? Answer: One heck of a challenging fundraise.

Still, this doesn’t seem to have deterred RMBV, the North Africa-focused investor led by a team of former Abraaj Group executives, from having another go at raising its first flagship fund since becoming independent in 2019. Private Equity International this morning broke the news that RMBV was seeking up to $400 million for North Africa Fund III and hoping for a first close by year-end. More details here.

This isn’t RMBV’s first attempt, with PEI reporting in 2020 that the firm was gearing up to launch Fund III. A source tells us that investors at the time told RMBV to focus on returning capital from Fund I and II before attempting to raise another. It has since done so, in part through a $150 million continuation fund transaction involving an Egyptian healthcare asset that saw all existing investors exit to the tune of 3x, and a new bunch of LPs coming in, the source said.

With traditional exit routes such as IPOs and sales to strategic or other PE buyers harder to access, the secondaries market offers a fourth way for managers to provide distributions to LPs. Whether such processes can ultimately help all managers with their fundraisings is, of course, the $64,000 question.

Operating onus
Side Letter was in attendance at day one of PEI Group’s Operating Partners Forum in London on Wednesday to hear from some of private equity’s top operators. Here’s what we learned:

  • Operators with an investing mindset. There’s been an evolution in the integration of operating teams in the investment process and it’s happening much sooner, noted Christopher Harwood, operating partner at Apollo Portfolio Performance Solutions. This means a real focus on MOIC, rather than IRR; capital allocation; and building relationships with deal and management teams.
  • Focus on strategic initiatives. Whether it’s accelerating M&A, focusing on talent, pricing and margins, or doubling down on the biggest customer relationships, operators need to spend more time and effort on portfolio companies in a recessionary environment.
  • Operating partners as peers. Nearly two-thirds of GPs said CEOs in their portcos see operating partners as peers, per management consultancy Blue Ridge Partners. Only 10 percent said they viewed operating partners as subordinate to the CEO, while 25 percent of CEOs see operators as senior. “At the end of the day we are investment firms. The investors lead; our role when we buy a business is to prepare the equity story,” said a senior MD at a pan-European buyout shop.
  • Access to specialism is key. Whether you are generalist firm or not, access to specialists in digital, data and analytics and ESG is important to oversee transformation.
  • Spend time and strengthen relationships. Backing strong management teams through good times and bad times – not the fly-in, fly-out model – and especially when it’s not going well, is when you can build long-term relationships, said Ralph Friedwagner, an operating partner in Caisse de dépôt et placement du Québec’s PE team.

If the Qiming’s right
It doesn’t appear to be all doom and gloom in China’s fundraising market. Qiming Venture Partners has held a final close on 6.5 billion yuan ($942 million; €856 million) for Qiming Venture Partners RMB Fund VII, per a Chinese-language statement this morning. The fund will target the technology, media and telecommunications, healthcare and consumer goods sectors in China. Its predecessor, Qiming Venture Partners RMB Fund VI, held its final close on 2.85 billion yuan two years ago.

Qiming’s successful fundraise speaks to China’s increasingly domestic PE market, with many firms opting to launch RMB-denominated funds in recognition of the tougher fundraising environment for USD-denominated strategies. Market sources tell us the RMB market is growing increasingly competitive as participants clamour to back companies in sectors less likely to be affected by regulatory upheaval.


While we’re talking events…
The opening panel on the first day of PEI Group’s Impact Investor Global Summit in London started with a bang. “Let’s face it: we’re a complete failure as an industry,” one impact manager claimed.

Jan Stahlberg, founder of Trill Impact, was referring to the small amounts being raised by impact funds in comparison with the vast sums seen elsewhere in PE, our colleagues at New Private Markets report (registration required). “When I raised €900 million in our first impact buyout fund in 2020, it was the largest impact fund in Europe,” Stahlberg said, noting that, by contrast, “EQT raised €40 billion in one year”.

While the impact investing market is growing at an impressive rate – data from the Global Impact Investing Network says it exceeds $1 trillion in invested capital, up from $715 billion in 2020 – it is still not a priority for many investors. One reason for this is the anti-ESG push ongoing across various US states; another is perceived negative impact on financial performance, according to research by Cambridge Associates.

Other panellists agreed with Stahlberg, suggesting the asset class must “walk the talk” by establishing a management framework that tracks and demonstrates tangible results. Veronika Giusti Keller, head of impact at BlueOrchard, said: “It’s not a one-person job… You need people behind [the scenes] to monitor, to check how impact targets have been achieved, to engage with companies, to truly promote change.”

Stealing a march on cybersecurity
Private equity firms shouldn’t wait for the US Securities and Exchange Commission to rule on cybersecurity policies and procedures before taking action, our colleagues at Private Funds CFO reported this week. The regulator has re-opened the comment period for its proposed cybersecurity rule until 22 May. The rule would require registered advisers to have written policies and procedures covering cybersecurity risk management and to review them at least annually. It also calls for firms to get written contracts with service providers that outline their own cybersecurity policies and procedures.

The proposal would mandate advisers to confidentially report “significant cybersecurity incidents” to the commission within 48 hours after determining on “a reasonable basis” that they happened. Advisers would also have to disclose cybersecurity incidents and risks to clients under Form ADV Part 2A. Neel Maitra, a partner at law firm Wilson Sonsini, tells Private Funds CFO there’s a “pretty good chance” the regulator will adopt the rule largely as proposed. Addressing cybersecurity risk is important for business and reputational reasons, noted Gail Bernstein, general counsel at the Investment Adviser Association.

“It really is ‘don’t sit and forget your risk management, don’t sit and forget your assessment of reputational risk, your assessment of business risk, your assessment of client risk,’” Bernstein said.

Today’s letter was prepared by Alex Lynn with Carmela Mendoza and Helen de Beer.