Side Letter: GCM Grosvenor SPAC, family office merger, Blackstone GP interests

A new listed private equity heavyweight is on its way: GCM Grosvenor has $20bn in PE AUM and will soon be listed on NASDAQ. Here's today's brief, for our valued subscribers only. 

She said it

“Both could provide convenient, professionally managed means for Main Street investors to invest in these markets”

In a 28 July virtual speech to the PLI Investment Management Institute, Dalia Blass, director of the US Securities and Exchange Commission’s investment management division, explains why her colleagues are “re-examining” rules that keep retail investors out of private markets, with closed-end funds and target date vehicles both providing possible ways to open them up. Subscribers to sister title Regulatory Compliance Watch can read more here.

Just happened

SPAC plan

PE industry watchers will have another substantial listed investor to keep an eye on: $57 billion Chicago-headquartered asset manager GCM Grosvenor is going public (press release) through a merger with a SPAC sponsored by financial services firm Cantor Fitzgerald. The transaction values GCM Grosvenor at $2 billion. Hellman & Friedman, which has been a minority investor in the firm since 2007, will exit as part of the deal. GCM Grosvenor’s management will continue to own more than 70 percent of the equity. The firm has more than $20 billion in private equity assets under management and specialises in backing small, emerging and diverse managers.

Family gathering

Pathstone, a US multi-family office part-owned by PE firm Lovell Minnick Partners, has acquired fellow investment advisor Cornerstone. The combined entity will boast 200 employees serving clients representing more than $20 billion in assets under advisement, according to a statement.

They did the math

2019 was a great year for exits in most geographies, according to eFront’s Global Private Equity Performance Series 2020. Before the global financial crisis, the duration of an LBO investment was 5.5 years. More recently, it has taken only 3.3 years for an average global LBO fund to generate liquidity. Surely this will change again, as holding periods stretch to account for the current downturn.

Essentials

Defaults rising

Earlier this year, law firm Proskauer published the first instalment of its Private Credit Default Index. Last week it updated the index (press release) with the following findings:

  • The overall default rate was 8.1%, up from 5.9% in Q1
  • Companies with more than $50 million of EBITDA at the time of origination had a 5.3 percent default rate, up from 4.4 percent in Q1
  • Companies with less than $25 million of EBITDA had a 9.2 percent default rate in Q2 compared with 7 percent in Q1

Said Proskauer’s Stephen Boyko: “While we have seen some very encouraging signs in recent weeks, the real test will be in the third and fourth quarters of this year.”

GP interests

Blackstone is well on its way to raising its second ‘strategic capital’ fund, which buys minority stakes in other private equity GPs. It has raised $3.5 billion, according to a filing. The Wall Street Journal has the target pegged at $4 billion.

Dig deeper

Institution: Florida Retirement System Trust Fund
Headquarters: Tallahassee, US
AUM: $210.30 billion
Allocation to alternatives: 20.96%

Florida Retirement System Trust Fund has confirmed $2.36 billion-worth of private equity commitments to 14 vehicles, a contact at the pension informed Private Equity International.

The commitments comprise €200 million to CVC Capital Partners VIII, $100 million to Francisco Partners VI, $200 million to Lexington Co-Investment Partners V, £60 million ($76 million; €67 million) to Livingbridge 7, $100 million to MBK Partners V, $175 million to Silver Lake Partners VI, $75 million to Strategic Investors Fund X, $350 million to CVI Credit Value Fund V, $200 million to Kennedy Lewis Capital Partners II, $200 million to LCM Credit Opportunities 4, $50 million to Strategic Origination and Lending Opportunities (SOLO), $250 million to Blue Torch Credit Opportunities SBAF Fund, $200 million to EIG Global Project Fund V and $150 million to PAG Loan Fund IV.

The $210.30 billion US public pension has a 7.60 percent target allocation to private equity that currently stands at 6.0 percent.

For more information on the Florida Retirement System, as well as more than 5,900 other institutions, check out the PEI database.


Today’s letter was prepared by Toby Mitchenall with Isobel Markham, Adam Le, Rod James, Carmela Mendoza and Alex Lynn

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