Side Letter: Insurance LP giant on IPO scepticism; TPG takeaways; Triton’s IR insights

Why Swedish insurance giant Skandia isn't hot on listed GPs. Plus: Triton's IR head says LPs are under siege and TPG warns fundraising could slow as a result of overcrowding. Here's today's brief, for our valued subscribers only.

Just happened

Daniel Winther: discontent over GPs listing (Source: Goran Ekeberg)

IP-No thank you
At least six alternatives managers have either listed or have been reported to be mulling going public over the past 18 months. Yesterday the Financial Times reported (subscription required) that CVC Capital Partners will delay its planned IPO until the autumn or even next year. Ardian is also understood to have considered a listing, and Clearlake Capital has reportedly been pitched by bankers.

With all the noise surrounding GPs going public, what do LPs actually think? One investor that has made its thoughts around manager IPOs clear is Skandia Asset Management. In a recent interview with us, Daniel Winther, the Swedish insurer’s head of PE and infrastructure, said it was difficult for LPs to understand the impact of an IPO on a manager’s organisation and culture, and that risk that a listed GP will focus more on growing AUM than maximising the value of a fund’s portfolio was a concern.

“It’s a fascinating paradox,” Winther told us. “You made your success investing in unlisted companies but you yourselves are so fascinated about becoming listed.” What Skandia likes about private equity is the superior model of ownership, he added. “You don’t have the shareholders, you don’t have the quarterly reporting, you don’t have all the compliance, you don’t have a majority. You have different shareholders with different incentives. You have so many other things that distort you from making great investments.”

GPs take note: if you’re planning an IPO, you can pretty much count Skandia out as a potential investor. Skandia’s roughly €8.3 billion PE portfolio returned 89 percent last year – without the help of investments in any of the listed giants such as BlackstoneKKRCarlyle Group or Apollo Global Management, according to Winther. Skandia is likely not the only LP of size that is bearish on GPs serving the twin masters of LPs and shareholders.

TPG takeaways
TPG is the latest PE heavyweight to have warned investors about the pressures of today’s heady fundraising environment. “The market is crowded with managers raising capital, some sooner than their clients expected and certain segments of the market are temporarily over-allocated,” CFO Jack Weingart said during Tuesday’s results call, noting that fundraising campaigns industry-wide will likely take longer than usual to complete. The firm expects to see a shift of the composition of its LP base, with more growth from Asian, Middle Eastern and even European investors, chief executive Jon Winkelried added. That said, it expects to complete first closings for TPG Partners IX and Healthcare Partners II around mid-year, followed by Asia VIII shortly after. Some other takeaways:

  • The firm raised $5 billion across strategies during the quarter, more than three times the amount it raised in the first quarter of 2020, largely driven by its fourth opportunistic real estate fund.
  • Investments in the quarter totalled $4 billion and $22 billion during the past 12 months; realisations hit $5 billion in Q1 and $29 billion, respectively.
  • TPG’s PE, healthcare and Asia funds appreciated by 11 percent in the quarter.
  • It ended the quarter with $120 billion of AUM and $30.3 billion in dry powder.

IR Insights with Triton
In the second instalment of our IR Insights series, Private Equity International catches up with Triton’s head of investor services and communications Amanda Tonsgaard, who says investors are feeling under siege from PE’s frenetic fundraising. “It’s quite clear some of them need to make some very hard choices on where to spend their time, where to spend their capital,” she says. The solution: talk about more than just fundraising, and “actually helping them with solutions and going broader across the organisation; co-investment is just one example”, Tonsgaard adds.

Tonsgaard’s comments chime with the experience of many other fundraisers, with some having to schedule multiple investor calls at the same time to keep up with the pace of fundraising, as Side Letter noted last week. The sheer volume and scale of funds in market ($1.2 trillion across 3,801 as of April, by our reckoning) is forcing some investors to cut back on ticket sizes or pass up opportunities altogether. This month’s tech rout may only exacerbate the problem, with some investors having to factor the dreaded denominator effect into their decision making.


Tokenisation’s Temasek tie-up
Temasek-subsidiary Fullerton has become the latest PE participant to embrace tokenisation, a technology on the frontlines of PE’s push to access a broader swathe of investors. The firm has tokenised a closed-ended fund of funds targeting six to eight PE and private credit vehicles, per a statement. Individuals outside of the US will be able to access the fund for a minimum of $10,000 via ADDX, versus $250,000 for non-users of the platform. An ADDX spokesperson tells Side Letter the FoF will be diversified globally by region, though he declined to share the fund size or ADDX’s allocation. Fullerton, which is part of Temasek’s $55 billion asset management group Seviora, joins the likes of Partners Group and Hamilton Lane in testing the exciting potential of tokenisation, as Side Letter noted in March.

To the manor (Dear)born
Chicago buyout and growth firm Madison Dearborn Partners – the world’s 49th largest PE firm according to the PEI 300 – has identified successors for its co-chief executives, per a Tuesday statement. Healthcare head Tim Sullivan and basic industries co-head Tom Souleles have been named co-presidents in anticipation of their promotion to co-chief execs in 2023, when the firm is expected to launch Fund IX. Incumbents Paul Finnegan and Sam Mencoff co-founded the firm in 1992 and have served as co-CEOs since 2007. The former will become chairman of MDP and the latter will transition to a senior advisory role. MDP closed its eighth flagship fund on $5 billion in May last year with commitments from the California Public Employees’ Retirement SystemMaryland State Retirement and Pension System and Washington State Investment Board, among others.

Dig deeper

Institution: Massachusetts Pension Reserves Investment Management BoardHeadquarters: Boston, USAUM: $99.8 biilionAllocation to alternatives: 34.7%

Massachusetts Pension Reserves Investment Management Board has committed total capital of $1.2 billion across nine private equity funds, according to its Q4 2021 quarterly update.

Commitments include $275 million to Thoma Bravo Fund XV, $150 million to Thoma Bravo Discover Fund IV and $150 million to Thoma Bravo Explore Fund II. MassPRIM has invested in 14 prior Thoma Bravo funds since 2000.

Mass PRIM allocates 17 percent of its portfolio to private equity. The institution’s recent fund commitments have been mainly based in the North America region. A majority of the funds are predominately focused within the technology, media and telecom sectors.

For more information on Mass PRIM, as well as more than 5,900 other institutions check out the PEI database.

Today’s letter was prepared by Alex Lynn with Adam Le and Carmela Mendoza.