Side Letter: GPs hold onto assets, Australia in context, new home for NewQuest

GPs don't want to let go of good assets and are tweaking the model so they don't have to. Also: more PE context on the Australian fires; a new office for NewQuest; December's largest funds and more. Here’s today's brief, for our valued subscribers only.

Just happened

GPs that can’t let go

Money in fistMore and more managers are looking for ways to cling on to treasured assets beyond the traditional three- to five-year private equity hold period. LPs have mixed feelings about this trend: some agree it can help to maximise value and deliver stronger returns, while others have concerns, particularly when it comes to cross-fund investments. Check out this deep dive story on sister publication Buyouts for the motivations behind this trend and the mechanisms firms are using.

A moonshot to save the earth

“Without a step change from industry, politicians and just about everyone, the dire scenes in Australia could become commonplace around the world. That this is happening before the 1.5-degree Celsius temperature increase the 2015 Paris Agreement is trying to avoid should serve as a grim warning,” comments Infrastructure Investor’s Bruno Alves this morning. A couple of standout points:

  • Aussie fund manager IFM Investors has provided a useful precedent by setting meaningful portfolio-wide emissions cutting targets. “If we are to avoid the worst, we will need many more ‘IFMs’,” notes Alves.
  • The combination of public leadership and private capital needed to tackle climate change recalls the co-operation required to put a human on the moon, only at a significantly larger scale. Managers of capital should think about the value creation opportunity that comes with it.

For full context of how the Australian fires and wider climate crisis are affecting private equity firms and investors, read Alex Lynn’s report here.

NewQuest in Singapore

Having boots on the ground gives secondaries buyers in Asia an important edge. No wonder then that TPG-owned direct secondaries specialist NewQuest Capital Partners is planning to open a Singapore office this year (sister title Secondaries Investor has the scoop). There is no explicit link between the move and the political unrest in Hong Kong (where NewQuest is based), but with firms there cancelling AGMs and events amid the disruption, it can’t hurt to have a contingency plan.

Essentials

Advisory firm TorreyCove is being acquired by Aksia, a consulting firm with a footprint in private credit and hedge fund strategies. In buying TorreyCove, Aksia adds private equity and real assets capabilities. “TorreyCove’s five MDs will be welcomed as partners of Aksia and assume senior management positions,” says the release.

New pressure on transparency. Allianz is the latest LP pushing private equity firms to standardise how they report performance to LPs, per The Wall Street Journal (paywall). It’s supporting the Adopting Data Standards Initiative, a new coalition that wants to “standardise the technical language used in electronic reporting files (through tagging and data definitions) of PE reporting,” according to its website. As the piece notes, standardisation in reporting has been a hot topic for years: it’s difficult for LPs to make direct comparisons between funds that report fees, returns and asset values in different ways. It’ll be interesting to see how much traction this group gets, particularly among the most in-demand managers that don’t need to give in to LP pressure. Expect plenty of discussion on this at our CFOs and COOs Forum in New York later this month.

Xen’s new CI-Yeo. A former senior director at Temasek subsidiary Azalea Asset Management has jumped ship to an online fundraising platform. Kenneth Yeo has been named chief investment officer at Xen, a Singaporean company launched in 2018. Yeo, who had only spent nine months at Azalea, previously served on the global investment committee of Allianz Capital Partners and spent 12 years as a vice-president at sovereign wealth fund GIC, per his LinkedIn. He’s the second high-profile hire by Xen in the past six months; the platform appointed Tim Janke, Blackstone’s first Asia CFO (he explains the platform’s plans here).

Inside tip

Which European financial services-focused PE firm is currently branching out into credit secondaries? It’s niche, but it makes sense, and we will let you know soon. If you have any info in the meantime, please drop us a note: carmela.m@peimedia.com.

We did the math

Who finished 2019 toasting a fund close? These firms did (data from PEI). Don’t forget there are Fundraise of the Year categories in each region for our awards categories. If you want to vote (you have two days left to do so), here is the link.

They said it

“The board recognises that the current market is very competitive, with uninvested capital or ‘dry powder’ reaching record levels. This clearly has implications for pricing and average private equity returns in the future. Despite this backdrop, it is worth remembering that the private equity industry has consistently outperformed the listed markets throughout economic cycles.”

The board of listed private equity vehicle Standard Life Private Equity Trust summed up the state of private markets as it updated the market on its 2019 performance this morning. The fund made eight primary fund commitments, three secondary fund commitments and one co-investment amounting to £188 million ($245 million; €220 million) in 2019. It received distributions “and income” of £138.1 million.


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Today’s letter was prepared by Toby MitchenallIsobel MarkhamAdam Le and Alex Lynn.


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