Side Letter: Family office allocations; LPs’ inflation hedges; Ambienta’s action plan

Asia-Pacific family offices are hungrier for private equity funds than their international peers. Plus: inflation could drive LPs towards debt and infrastructure next year and Italy's Ambienta wants to launch a raft of products. Here’s today's brief, for our valued subscribers only.

Just happened

APAC family offices: planting more into PE (Source: Getty)

Family planning
Family offices represent an increasingly significant source of LP capital the world over, and perhaps nowhere more so than in Asia-Pacific. As Private Equity International noted last year, the region is home to a rapidly growing pool of private wealth available for the private markets. A report out this morning from Asia’s Raffles Family Office and Campden Wealth sheds fresh light on the scale of this potentially lucrative fundraising opportunity. Here are some key takeaways:

  • PE has seen the biggest upwards shift in average portfolio allocation this year, climbing 2 percentage points to 23 percent.
  • PE funds are the most popular asset class for future investment (57 percent), followed by developing market equities (55 percent) and VC (50 percent).
  • This is despite APAC PE portfolios underperforming the global average. APAC families received 13 percent and 15 percent returns from their PE funds and direct investments, respectively, last year, compared with 19 percent and 20 percent for global families.
  • Some 42 percent of APAC families now engage in sustainable investing, with the average allocation climbing 4 percentage points this year to 29 percent.
  • Inflation and interest rate hikes are top concerns over the next year.
  • APAC families are more focused on diversifying their portfolios (46 percent) in 2022 than their global peers (34 percent). Green tech and digital transformation are the two most popular sectors for increased investment.

Flavours of the month year
LPs are increasingly looking towards infrastructure and private credit as hedges against inflation. That’s according to two senior investment advisers Side Letter has spoken with in recent weeks, who noted that both asset classes are likely to become key focus areas next year. Beyond their defensive characteristics, one executive said there are “just more flavours of ice cream” when it comes to opportunities to invest in these areas.

“Twenty years ago… private credit wasn’t even a real thing – it was distressed or mezzanine, which is very different than the senior collateralised lending we’re talking about in private credit today,” the adviser said. “You’re seeing that sort of confluence of things where, yes, it’s an interesting strategy in infra and credit because of the rate environment, but at the same time the ecosystem of available funds, managers, financing capabilities and skill sets is just more developed and more accessible for more investors.”

Precisely what these increased appetites for other asset classes will mean for next year’s PE allocations, particularly given that many LPs are already overexposed, remains to be seen.

Essentials

Ambienta’s action plan
In a bid to become a multi-strategy one-stop-shop for institutional investors, Italian mid-market firm Ambienta is planning products in new asset classes. There are 82 possible products the firm could launch, founder Nino Tronchetti told our colleagues at New Private Markets last week (registration required). The first of these will be launched early next year.

Ambienta is one of the few firms that can credibly claim to have focused on sustainability trends before it was in vogue; the firm raised €217.5 million for Fund 1 in 2009. It closed Fund IV over the summer on €1.55 billion and now manages around €3 billion across private equity buyout funds and public equity funds. It recently hired IR and fundraising veteran Laurent de Rosière from BC Partners to help in its bid to cultivate multi-strategy strategic relationships with large institutions.

So how does the firm narrow that funnel of 82 possible launches into one? Three filters, said Tronchetti: “Scale, skills and maturity of environmental trends.” The first of these refers to the capacity a strategy has to scale quickly without putting “authenticity or performance at risk”, he added. Second is whether it uses skills that closely match those already in the building. Real estate, for example, offers a huge opportunity – an expertise that does not exist currently at Ambienta. “We’ll do it later, but it is not next in line,” he said. Third is whether the strategy allows Ambienta to back mature businesses that fit within the firm’s environmental thesis.


Today’s letter was prepared by Alex Lynn with Madeleine Farman and Toby Mitchenall.