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Side Letter: Insight’s $3bn double-down; KIC’s 25% alts goal; PE’s legal headache

Insight Partners has set a substantially larger target for its second pool of capital enabling it to double down on highly prized assets. Plus: South Korea's $201 billion sovereign wealth fund is ramping up its alternatives appetite and private equity's heady fundraising environment is giving fund lawyers a lot to think about. Here's today's brief, for our valued subscribers only.

Just happened

Insight: Doubling down on prized assets (again) (Source: Getty)

Insight’s encore
Insight Partners has upped the ante on its second fund designed to take stakes in companies it already owns. The New York-based tech investor is targeting $3 billion for Fund XI Follow-On, which will invest in businesses acquired by its 2019-vintage, $9.54 billion flagshipPrivate Equity International reported on Friday. Insight’s debut follow-on fund, raised to invest in the 2017-vintage Fund X, has been in market since March last year with a $1.25 billion target, according to PEI data.

Follow-on funds can fulfil a number of purposes, one of which is to allow GPs to provide extra capital for assets it believes will become top performers with more time and money. “Many Fund X investments are presenting attractive follow-on investment opportunities beyond Fund X’s capacity,” Hamilton Lane noted last March, in reference to Insight’s Fund X Follow-on.

The big step up in size for Fund XI Follow-On may indicate that Insight is gearing up for longer hold periods, a greater need for capital among its portfolio companies and perhaps the opportunity to make add-on acquisitions at a good price – especially amid the drop in tech stocks valuations and the fact the IPO window is considered to be shut for now. As one managing director at a large tech investor recently told Side Letter: “Having cash on hand is everything in an environment like this.”

Seoul-d on alternatives
Korea Investment Corporation has big plans for alternatives. The $201 billion sovereign wealth fund plans to raise its alts allocation to 25 percent by 2025, from 17.5 percent at the end of last year, The Korea Economic Daily reports (subscription needed). It aims to hit this ambitious target in part through a rise in direct investments; enhanced environmental, social and governance and responsible investments; and enhanced partnerships with domestic asset managers. Within PE, which accounts for 44.6 percent of its alternatives AUM, the fund is keen on healthcare, tech, automation and mobility, as well as venture capital.

KIC’s plans for alternatives could take on even greater significance as the fund aims to substantially increase its AUM; earlier this month, for example, the government reportedly entrusted KIC to manage additional capital from domestic pension funds and mutual aids. If this trend continues, reaching a 25 percent allocation target will require some massive commitment activity.

Laying down the law
It has been well documented that LPs are feeling the strain from PE’s frenetic fundraising environment. Spare a thought, too, for fund lawyers. The challenges posed by today’s fundraising environment are numerous – not least, the proliferation of mega-funds, which is creating extra work for legal advisers in particular, as PEI explores in this year’s Legal Special Report.

The rapid increase of fund sizes, in combination with complex fee negotiations, extended fundraising timelines and LP capacity constraints, has led some GPs to look beyond their existing investor bases. This means lawyers need to make sure they are designing structures that suit the widest possible range of market participants, notes Christopher Elson, special funds counsel at law firm Proskauer, who adds they also need to design a fundraising subscription process that is “manageable for all different types of investors”.

Essentials

Impact trends
Last week saw the return of PEI’s in-person impact summit in London, where more than 300 specialist impact fund managers, asset managers and institutional investors from across the globe came together to discuss the trends and challenges shaping the burgeoning strategy. PEI‘s Evie Rusman was on the ground to discover this year’s hottest trends. Here are some takeaways:

  • Data collection is a top priority: “Measuring, monitoring and tracking progress is the only way forward to avoid the greenwashing we’ve seen,” EQT partner Rikke Nielsen told delegates, noting that global standardisation would make data more reliable and effective.
  • Impact washing is a growing issue: LPs should encourage GPs to establish impact committees in order to minimise greenwashing by  helping investors engage with managers more regularly and monitor their progress in meeting goals, said Anita Bhatia, investment director at the Guy’s and St Thomas’ Foundation.
  • Impact is being used to attract top talent: As labour shortages continue to prove a challenge, companies that are committed to making a positive impact will have an advantage in the hiring market, noted Stephen Muers, chief executive officer at Big Society Capital.

Dig deeper

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

23 May

24 May

25 May

26 May

27 May


Today’s letter was prepared by Alex Lynn with Rod JamesHelen de Beer and Evie Rusman