GPIF’s yen for PE
Japan’s Government Pension Investment Fund not only has the distinction of being the world’s largest pension – it is also one of private equity’s most influential investors. That’s because the giant is something of a bellwether for Japanese institutions, many of whom look to GPIF as a pioneer and trendsetter when it comes to pushing deeper into the asset class. Japan is considered one of the most exciting LP markets for PE given both its scale and comparative nascence when it comes to investing. So it is with particular interest that Side Letter perused GPIF’s latest annual report, which was published Friday in Japanese. Here’s what you need to know:
- Its PE holdings grew fivefold to ¥306.6 billion ($2.25 billion; €2.2 billion) from ¥61 billion in the year to 31 March. This growth was largely driven by ¥199.4 billion of capital calls by its existing commitments.
- The fund has committed ¥927.8 billion to PE in total as of 31 March, up from ¥708.1 billion at the same time last year.
- PE had delivered a 21.38 percent internal rate of return in yen terms for GPIF since it began investing and as of 31 March.
- PE accounts for 14 percent of its total alternatives AUM and about 23 percent of its total commitments to alternatives.
- North America has grown to represent 77 percent of its PE portfolio – more than double the 35 percent reported last year.
- Alternatives accounts for about 1.1 percent of the pension’s total AUM. The latter figure dropped 1.1 percent to ¥196.6 trillion in the quarter ended 31 March due in part to a decline in public markets.
A long-lasting connection
Equistone Partners Europe has completed its first continuation fund transaction, per a Monday statement. The firm opted for a single asset transfer of Fund V portfolio company Sicame to a continuation fund understood to be approximately €300 million in size. AlpInvest Partners was the lead investor in the deal, which also included commitments from Equistone, roll overs from some Fund V investors and the company’s founding families. Lazard ran the auction process. Equistone declined to comment on the transaction size.
French-headquartered Sicame supplies electrical connectors and generated over €450 million of revenues in 2021. Equistone is clearly attached to the business: it became a minority shareholder in the business in 2009 via Fund III before buying out a majority stake in 2016 via its €2 billion Fund V.
Demand for GP-led secondaries processes in Europe is yet to reach appetites seen in the US, with secondaries funds typically investing 70 percent of their funds in the latter, LGT Capital Partners’ secondaries co-head André Aubert told affiliate publication Buyouts last month (registration required). Local nuances and languages across Europe mean there is a steady supply of mid-market GP-led deals involving country-specific funds that have particular structuring requirements. There are also differing levels of experience in the European market when it comes to GP-leds, with many attempting these transactions for the first time.
Speaking of Equistone…
PE dealmaking may have lost some momentum from last year’s heights, but appetites for UK tech appear to be in good health. There were 20 TMT deals worth £6.2 billion ($7.5 billion; €7.2 billion) recorded in the first half of the year, nearly matching 2021’s full-year total of £7.2 billion, according to provisional data from the Centre for Management Buyout- and Private Equity Research and Equistone. This is despite the number of buyouts in H1 falling to 96 (compared with 149 in H1 2021) and total deal values dropping to £19.7 billion (from £26.6 billion). Here are some other takeaways:
- Healthcare drew 17 transactions worth £5 billion.
- Mega-deals (those north of £1 billion) accounted for 77 percent of deal value.
- Capital structures have become more conservative: for deals above £100 million, the average equity portion rose from 37.3 percent in 2021 to more than 50 percent in H1 2022.
- The UK remains the largest PE market by both volume and value in the region; France ranked second by volume and Germany third.
LP meetings. Here are some LP meetings to watch out for this week.
Today’s letter was prepared by Alex Lynn with Carmela Mendoza, Chin Yuen and Madeleine Farman