Side Letter: HKVCA takeaways; Partners Group’s $22bn; MetLife’s NJ hires

Takeaways from Friday's HKVCA annual private equity forum. Plus: Partners Group amassed more than $22 billion last year and MetLife has poached more of New Jersey's LP talent. Here’s today's brief, for our valued subscribers only.

Just happened

HKVCA’s annual PE forum: back in person

Despatches from Hong Kong
Friday saw the Hong Kong Venture Capital and Private Equity Association host its first in-person annual forum since 2020. Topics du jour included Asia’s corporate carve-out opportunities; LP diversification for Chinese GPs; and whether the latter’s reopening could spark buying opportunities in the secondaries market (more on that here). The mood on the ground was one of cautious optimism for 2023, though many people Side Letter spoke to seemed resigned to the fact that activity may not fully pick up until H2. Here are some key talking points from the event:

  • GPs are seeking new sources of capital: “A lot of the Asian GPs, especially China GPs, are thinking about LP diversification now because a lot of them are pretty US centric,” said Judy Zhang, managing director at Cambridge Associates. “It’s going to be more Middle Eastern, Rest of Asia.”
  • India may be a viable China alternative: “India for us has been a good market,” said Raju Ruparelia, senior managing director for direct PE at Ontario Teachers’ Pension Plan. “Sort of post the first election of Modi, we started doubling down there, so [for] our exposure we’re a little bit overweight India, if anything. And surprisingly, the returns have been as good as it has been in China.”
  • Expect carve-outs and take-privates: “We’re going to see more corporate carve outs, particularly in the more advanced markets: Korea, Australia, Japan,” said KY Tang, founding chairman of Affinity Equity Partners. “I think the second opportunity set is we’ll probably see an increase in take-privates because valuations have dropped so much. We have seen some companies in Asia… [with a] $3 billion or $4 billion market cap [whose] share price dropped something like 60, 70 percent.”

On target
A challenging fundraising environment doesn’t seem to have impacted Partners Group‘s annual goals. The firm raised $22.3 billion last year, a figure in line with its full-year guidance of $22 billion to $26 billion at the beginning of 2021, according to its H2 2022 AUM statement. Partners Group raised $13.1 billion in the first half, with volume dropping slightly in the backend of 2022 as investors lengthened their conversion periods. Its client solutions products, which includes separate accounts, received $8.4 billion of 2022’s total; evergreen programmes, which have liquidity features enabling individual investors to access private markets, raised $7.2 billion.

Partners Group expects to raise a more modest $17 billion to $22 billion this year, assuming the normalisation of client conversion periods and the stabilisation of financing markets to support an increase in activity later in the year, it said. The firm will also launch a number of next-generation flagship strategies in the second half. Partners Group’s AUM sat at $135 billion as of 31 December, growing 10 percent year-on-year excluding foreign exchange effects.

The firm invested $26 billion last year, down from $31.7 billion in 2021, and realised $14 billion, less than half the $29.1 billion realised a year prior. It attributed this drop to having brought forward a portion of its direct exit pipeline for early 2022 into 2021, and the decision to postpone certain realisations planned for 2022 to future years.

Musical chairs: an encore
The LP community’s game of musical chairs shows no signs of slowing. Insurance giant MetLife has once again tapped New Jersey’s state pension system, this time hiring John Panebianco as an associate director for PE, our colleagues at Buyouts report (registration required). Panebianco worked for the New Jersey Division of Investment‘s private markets portfolio from 2016 to 2022 and joined MetLife last year, according to his LinkedIn profile.

His new employer’s PE team is led by Panebianco’s former New Jersey colleague Jared Speicher, who joined MetLife last year to lead the US LBO portfolio. New Jersey’s $82.2 billion pension system has had a history of turnover in the asset class, with many of its former PE chiefs moving into industry. Despite this, the system has steadily built up a large portfolio, which was valued at about $12 billion as of July, according to system documents.

There were a number of significant LP moves last year, including the departure of the California Public Employees’ Retirement System’s managing investment director for PE Greg Ruiz to Jasper Ridge Partners. CalPERS, meanwhile, hired Kaiser Permanente‘s former head of alternative investments Anton Orlich as managing investment director for growth and innovation. Elsewhere, Ontario Teachers’ Pension Plan‘s global head of equities, Karen Frank, left at the end of last year; Frank Amberg, head of PE at Munich Re Group’s asset management unit MEAG departed for AltamarCAM; and Steve Moseley, former alts head at Alaska Permanent Fund joined Wafra.


The next wave is retail
With the end of the bull market in equities and bonds, retail investors are poised to set their sights more firmly on alternative assets in the opinion of Jack Inglis, chief executive officer of the Alternative Investment Management Association, as part of seven predictions for the alternative investment industry in 2023.

Inglis points out that while many institutional investors are already fully weighted in alternatives, private wealth assets are substantially underweight. He says this represents a “huge opportunity” for managers over the next decade as long as they adapt their distribution channels and provide innovative fund structures.

Inglis also predicts that 2023 could be a year of difficult questions from investors around ESG and what they want from alternative investment funds when it comes to the application of ESG principles and how this might affect returns. With the US setting its sights on the regulation of responsible investing, Inglis says “politicisation of ESG across the red-blue divide” could frustrate some regulatory efforts.

Dig deeper

LP meetings. Here are some LP meetings to watch out for this week.

17 January

18 January

19 January

20 January

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