Side Letter: First-time funders; Pantheon’s $1bn milestone; Norway’s climate enthusiast

It's the cusp of the Easter long weekend. We'll be back on Tuesday – in the meantime here's today's brief, for our valued subscribers only.

Just happened

First-time fortunes
In a fundraising environment characterised by a wave of mega-funds and increasingly overallocated LPs, first-time funds are likely to need all the help they can get. Enter global placement agent Eaton Partners. The US-headquartered firm has partnered with its parent company, Stifel Financial, and fund of funds business RCP Advisors to launch Twelve Degrees, a platform designed to support North American emerging managers.

The new venture was unveiled via a statement this week, and Private Equity International‘s Carmela Mendoza has got her hands on some additional details this morning. Among them is that the trio will be raising third-party capital to fund the platform, and that their targets are likely to be mid-market buyout and growth equity managers, first-time funds and spin-outs. It is unclear whether Twelve Degrees will also be able to acquire GP stakes in the new firms. You can read more about the platform, including the meaning behind its unusual name, here.

Twelve Degrees is one of several new platforms offering these services, joining in the footsteps of TPG NEXT and Atypical Partner, both of which launched within the past 18 months. The timing of these launches is unlikely to be a coincidence. PEI’s most recent LP Perspectives survey found that only 31 percent of respondents were “just as likely” to commit capital to new managers as to existing ones, compared with 38 percent in 2020. Forty-three percent said they do not invest at all in new managers, compared with 29 percent the year before.

The threshold for placement agents to take on emerging manager clients has also increased, as PEI reported in its March Deep Dive. Such fundraises accounted for about 50 percent of Monument Group‘s new business prior to the pandemic, for example, but only 10 percent last year and 20 percent this year. Platforms such as Twelve Degrees, then, make sense: Eaton, for its part, wouldn’t feel pressured to pass up attractive first-time fund mandates, but will be rewarded for its additional risk with a fund interest or revenue sharing arrangement; emerging managers, meanwhile, get the helping hand they’ll so obviously need in this top-heavy fundraising market.

LP to watch
As appetites for climate tech investing grow, GPs on the hunt for new sources of capital can add Stavanger, Norway to their fundraising itinerary. Nysno Climate Investments, a state-backed investment company formed in 2018, is already one of the most active backers of managers and companies focused on sustainable climate solutions. It has invested in 11 funds so far, including those managed by VerdaneEnergy Impact Partners and venture firms 2150 and AP Ventures. Its focus is primarily in VC, although it also has the flexibility to invest in growth-stage companies. We caught up recently with investment director Lars Hvam, who warned that the fundraising frenzy for sustainability and climate-focused vehicles might increase the competition for assets and their valuations. “These I think would pose the biggest challenges in generating returns,” he notes. Keep an eye out for our full interview with Nysno Climate Investments later today.

Essentials

Pantheon’s private wealth
It’s no secret that the private wealth channel is one of the fastest growing sources of capital for PE firms. Case in point: the AMG Pantheon Fund –Pantheon‘s US private wealth vehicle – which surpassed the $1 billion AUM landmark this week, just nine months after it reached $500 million, per a statement. Launched in 2014, the fund has accrued 260 wealth manager clients and 6,000 individual investors. As of 28 February, its portfolio comprised 142 investments alongside 80 managers, and had delivered a 15.6 percent five-year annualised return. ’40 Act’ funds like these have been rising in popularity of late as a means to access this burgeoning pool of capital.

Seeking fame and fortune
The celebrity and PE worlds are becoming increasingly enmeshed, the Financial Times reports. This week, Milan-based Azimut Group agreed to buy a 10 percent stake in BroadLight Capital, a PE firm targeting the technology, consumer, and media and entertainment sectors. BroadLight’s co-founders – brothers Rick and Kevin Yorn, a talent agent and entertainment lawyer, respectively – represent the likes of Leonardo DiCaprio, Cameron Diaz and Chris Rock. “We have introduced hundreds of high-growth businesses… to our network that extends beyond the global entertainment business and reaches entrepreneurs, creatives, investors and influencers of culture,” the brothers said.

More and more celebrities are dipping their toes into the world of PE. Basketball star LeBron James received backing from sports investor RedBird Capital Partners for his media and entertainment business SpringHill Company last year. Blackstone has also previously backed Candle Media, a film production business founded by Hollywood executives that has since acquired Reese Witherspoon’s production company, Hello Sunshine. At a time when public scrutiny of PE is at its highest, a show of support from popular celebrities may go a long way.


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