Just happened

A game of two halves
To the surprise of just about no one, private equity fundraising was down quite some way in H1 2022. Some 622 funds closed on $337.3 billion in the first half, including closed-end funds, as well as co-investment, separately managed account and joint venture vehicles, according to preliminary data from PEI. This is significantly lower by value than the $459.2 billion raised in the equivalent period last year and, perhaps more tellingly, represents just a fraction of the 1,033 funds closed as well. In other words: capital has flooded into the hands of a smaller number of larger funds.

This dynamic could also crop up in H2 2022 statistics, which should more readily reflect the capacity constraints affecting institutional investors this year. Many investors have struggled to cope with the sheer number of re-up opportunities hitting the market at the same time (as of 30 June, funds were seeking $1.25 trillion between them), meaning their annual allocation budgets for 2022 might already be spoken for by the second half of the year. Some LPs are requesting that managers delay their closes until 2023 so they can use next year’s allocation budget.

Make no mistake: this is not to suggest that fundraising will dry up altogether, or that there’ll be a mass zombification of firms. Blackstone, for its part, remains confident of its ability to raise $150 billion in the next round of fundraising. Still, with more funds being asked to push into 2023 and distributions to LPs on the decline, it wouldn’t be a surprise to see an even more muted fundraising total in the latter half of this year.

GIC’s highlights
Singaporean sovereign wealth giant GIC, the world’s second-largest PE investor according to the GI 100, posted its annual investment report this morning. Here are some key takeaways:

• GIC’s PE exposure, which includes an unspecified proportion of debt, grew from to 15 percent to 17 percent in the year to 31 March. “Within equities, we have increased our allocation to certain high-growth asset classes, such as private equity, that can provide returns that keep pace with elevated inflation,” it noted.
• The US represents its largest geographic exposure for the total portfolio at 37 percent, followed by Asia ex-Japan (25 percent), unspecified global (10 percent) and the eurozone (8 percent).
• Over 20, 10 and five years, the portfolio returned 7 percent, 6.4 percent, and 7.7 percent, respectively. The latter was boosted by the strong market recovery in FY2020/21 and early FY2021/22, despite the corrections towards the end of FY2021/22.

Essentials

A Synova times
Though it’s hardly surprising these days to see funds closing on much larger sums than their predecessors, it remains unusual to see a fund valued at more than double the prior vintage. Enter Synova. The London-based mid-market firm has collected £875 million ($1.1 billion; €1 billion) in a one-and-done on its fifth flagship fund, per a statement. Fund V, which had a £750 million target and was in market for just three months, is more than double the size of its £365 million, 2019-vintage predecessor.

Roughly £250 million of this new capital will be earmarked for a pool named Chrysalis, from which Synova will back small-cap businesses for the first time. The firm is also expanding its target geography beyond the UK and Ireland to include platform deals in continental Europe. Synova’s ambitious expansion seems to have won the support of its existing LPs, which increased their commitments by more than 50 percent on average, per the statement.

Its runaway success on the fundraising trail suggests that, while investors are undoubtedly hindered by capacity constraints, they remain willing and able to double down on those with a compelling proposition.

Moonfare’s Middle East move
Individual investors in the UAE’s seven emirates can now access a portfolio of buyout and growth funds through digital fundraising platform Moonfare, per a statement this morning. Individuals can participate from as little as $60,000.

The opportunity set for PE is significant: the population of ultra-high-net-worth individuals in the UAE grew by 17.5 percent last year, according to Capgemini data. In the Middle East more broadly, the high-net-worth population and wealth grew 5.5 percent and 6.3 percent, respectively, led primarily by the UAE and Israel.

Moonfare’s expansion in the region follows a busy start to 2022: the platform’s AUM reached €2 billion as of early this month, with more than 40,000 registered users. It also launched offices in New York, Singapore and Zurich, with further plans to expand in Paris.

“And, of course, if the time is right, plus valuations are in a reasonable expectation level – which was not the [case]… five months ago – M&A or inorganic growth is clearly our expansion plan,” chief executive Steffen Pauls told Side Letter last month. “Not to buy assets… but to buy talent and maybe licences and go faster to market.” Watch this space.

Today’s letter was prepared by Alex Lynn with Carmela Mendoza