Side Letter: How to remove your GP; PE’s staple shortage; CPP’s PE head

What to expect when you're expecting (a GP removal). Plus: why stapled secondaries transactions are becoming a rarity and which firms does Blackstone own? Here's today's brief, for our valued subscribers only.

They said it

“It’s not just about getting a seat at the table.”

Speaking to affiliate title Secondaries Investor (registration required), Akin Gump’s PE funds and secondaries partner Mary Lavelle outlines the aims of its Women in Secondaries Network.

Just happened

How to remove a GP
Yesterday we discussed the decision by Novalpina‘s limited partner advisory committee to seek a replacement GP for its €1 billion debut fund (refresher here). The debacle, which is ongoing, got us thinking about what it actually means to remove one’s GP, and how easy it is to do so. Private Equity International‘s Carmela Mendoza outlines, with the help of lawyers from Stephenson Harwood, things to consider before attempting a change. Here are some highlights:

  • Though LPAs typically legislate for both “for cause” or “no fault” removals, the former is usually not a realistic option due to the time and costs required to reach this conclusion in court.
  • Besides a replacement GP or liquidating the fund, other options would be to hire a fund-less sponsor or establish an interim manager structure with some members of the existing management team.
  • Expect to negotiate with the outgoing GP on costs such as adviser fees, severance payments, and one-off set-up costs for the new sponsor.

CPP Investment’s new PE head
Suyi Kim, a Hong Kong-based veteran of Canada’s largest pension, is taking the helm of its private equity unit, the pension said on Wednesday. Kim will oversee roughly $100 billion of PE assets as senior managing director and global head of private equity at CPP Investments from mid-September. Her appointment comes a month after PEI reported that former PE head Shane Feeney was departing the pension giant to join Northleaf Capital Partners.

Running out of staples?
There was a time in recent years when it seemed every manager and their fund were seeking to kick-start fundraising or reach a close with the aid of so-called “stapled secondaries deals” – processes in which a GP requests that a secondaries buyer acquiring stakes in one of their existing funds also commits primary capital to a new fund. This part of the market has calmed in recent years: just over one third of secondaries processes last year centred around GPs involved stapled primary capital, compared with more than half in 2019, according to data from Evercore.

We recently caught up with Neal Costello, managing director at AlpInvest Partners, who said (among other things) that the buoyant fundraising market has meant fewer managers need stapled capital. “Because fundraising has been so hot, there has been less need for GPs to use utilise staples to raise the desired amount of capital,” Costello says, though he cautions: “If the tide does turn, you’ll probably see more of them [stapled deals] again.”

Are you a GP considering raising capital via such deals? We’d love to hear your thoughts.

We did the math

Blackstone’s GP stakes
Blackstone’s GP stakes unit, Strategic Capital, has disclosed two deals in as many weeks. Its latest investment was a minority stake in Chicago-headquartered GTCR, which came hot on the heels of an investment into mid-market firm Sentinel Capital Partners. With this recent flurry of additions to Blackstone’s GP stakes portfolio, PEI compiled this handy guide to which PE firms are, in turn, owned by the world’s largest PE firm.

Essentials

Grafine’s fundraise
Grafine Partners, a firm hoping to shake up the PE fund model, is seeking $500 million for its debut fund, per a Form D filing. Grafine was founded in 2019 by Elizabeth Weymouth, a former partner at Riverstone Holdings, to invest in alternative asset managers via seed funding and minority stakes, direct deals and alongside operating partners. What makes Grafine different, we understand, is that it will act as a direct investing platform in which its capital partners are co-owners of investment vehicles and share in all economics. Curious to learn more? PEI caught up with Weymouth in June to discuss the concept further.


Today’s letter was prepared by Alex Lynn with Adam Le and Michael Baruch.