Private Equity News & Analysis

Side Letter: Greenbriar’s bellwether billions; Carlyle’s chosen chief; Tikehau’s debt CFO

Industrials firm Greenbriar is further evidence that capital remains available for managers below the mega-fund fold. Plus: Carlyle's search for a new chief appears to be over; and Tikehau has raised a collateralised fund obligation. Here’s today's brief, for our valued subscribers only.

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Just happened

Greenbriar’s bellwether billions
Industrials specialist Greenbriar Equity Group has delivered the latest sign that LP capital isn’t only flowing to mega-funds in an uncertain macroeconomic environment. The Connecticut-headquartered firm has collected $3.48 billion for its sixth flagship, Side Letter has learned. Greenbriar Equity Fund VI, which launched in the third quarter of last year with a $2.75 billion target, is more than double the size of its 2021-vintage predecessor. Greenbriar is understood to have made a roughly 5 percent GP commitment to both vehicles.

Nearly all of Fund V’s LPs re-upped, and those commitments significantly exceeded the prior fund size, said managing partner Noah Roy. Fund VI’s LP base has more than double the proportion of non-US LPs than its predecessor, including those from Europe, Middle East and Asia; multiple sovereign wealth funds and public plans also came in as first-time investors. LPs include Los Angeles Fire & Police Pension System, Arkansas Teacher Retirement System and the Educational Employees’ Supplementary Retirement System of Fairfax County, PEI data shows.

Fund VI, which is already 20 percent deployed, targets US supply chain, business services and advanced manufacturing companies. Roy said Greenbriar may have benefited from LPs having allocated more heavily towards tech and growth-oriented strategies in recent years. “Some of the volatility in those markets has spurred a re-look at more industrial-focused managers – particularly for hybrid strategies like ours where a majority of our capital is going into asset-light services businesses [where] there is a lot of tech-enablement, particularly in the supply chain,” he noted.

Greenbriar’s close may come as welcome news to those firms concerned that market uncertainty and fundraising congestion would drive LPs towards larger, blue-chip funds capable of swallowing substantial cheques. Its success echoes that of London’s Oakley Capital, which also nearly doubled the size of its latest flagship this month, and Greenbriar’s Connecticut neighbour, GemSpring Capital, which closed Gemspring Capital Fund III on $1.7 billion last month. Fundraising may favour the brand names in this environment, but, as these recent examples demonstrate, funds are still getting raised lower down the size chain.

Hail to the chief
Carlyle Group‘s search for a new chief executive appears to be over. The Washington DC-headquartered firm has tapped ex-Goldman Sachs executive Harvey Schwartz for the role, Reuters reports. Schwartz served at Goldman between 1997 and 2018, including most recently as co-chief operating officer, according to Goldman’s website. He fills a role that has been empty since the sudden and unexpected departure of his predecessor, Kewsong Lee, back in August. Though Carlyle said its CEO search wasn’t a factor in decreased fundraising inflows during the third quarter of last year, its fundraisers will likely feel relief that any uncertainty over the position should be resolved.

“I’ve been on the road a lot myself, talking to investors,” Bill Conway, co-founder, interim chief executive and co-chairman of Carlyle, told analysts in November. “But I think I don’t see any long-term damage at all in this… And I think the investors in our funds, they like seeing somebody at the top who they know understands exactly what they are trying to accomplish.”

Tikehau’s CFO
Tikehau Capital has raised a $300 million collateralised fund obligation backed by cashflows from commitments to its direct lending and private debt secondaries strategies, per a statement from investment bank Jefferies that Side Letter has seen exclusively. The CFO’s assets consisted of interests in Tikehau’s own debt funds as well as third-party managed private debt funds originated by the firm’s private debt secondaries strategy. The rated debt and equity tranches were placed with large US institutions; Tikehau retained a minority share of the equity.

Many GPs have been actively contemplating and launching CFOs over the past year, Scott Beckelman, global co-head of private capital advisory at Jefferies, and managing director Rich Saltzman, told Side Letter by email. “CFOs enable sponsors to raise third-party debt and equity capital to deploy into their managed fund vehicles and drive fundraising objectives,” they added. “More specifically, sponsors are able to tap into an investor universe, such as insurance companies, who typically struggle to make traditional LP fund investments, thereby expanding their investor base and building key relationships.”

Essentials

Sustainable growth
The latest Sustainable and Impact Investing Insights and Perspectives report from Cambridge Associates sheds new light on how LPs are working sustainability considerations into their investment activity. The investment adviser polled 144 clients on three areas: investment structure; implementation; and governance and measurement. Here are some findings:

  • Some 55 percent of respondents have more than 5 percent of their portfolios allocated to sustainable and impact investing; of those who don’t yet participate, 45 percent expect to in future.
  • Most (85 percent) employ ESG integration, up from 82 percent in 2020.
  • The proportion engaged in impact investing rocketed from 59 percent in 2020 to 76 percent last year.
  • Climate change and resource efficiency (76 percent) is the most popular focus area, followed by social and/or environmental equity and financial inclusion.
  • Nearly all (95 percent) of respondents with diverse manager strategies have increased their allocations to them; 92 percent anticipate increasing their allocation in the next five years.
  • Only 8 percent have created a decarbonisation or net zero target for their portfolio.

Dig deeper

LP meetings. It’s Monday, so here are some LP meetings to watch out for this week.

6 February

7 February 

8 February

9 February

10 February

Today’s letter was prepared by Alex Lynn with Carmela Mendoza and Madeleine Farman.