Side Letter: Investors’ 2021 priorities, Navab alumni, SPACs in Europe, Mumbai high

An early look at Probitas's investor survey; tracking the Navab Capital Partners alumni; SPACs in Europe; plus much more. Here's today's brief, for our valued subscribers only.

They said it

“Strategy is irrelevant; a demonstrable superior track record is my primary concern”

The answer chosen by 26 percent of respondents to a Probitas Partners survey of institutional investors, when asked which strategies in the US mid-market were most appealing. Clearly some investors have great faith in the persistence of outperformance

Just happened

2021: What investors want
The kind people at placement firm Probitas Partners have given us an early look at the results of their annual survey of 70 institutional investors. Things that jump out:

  • Among all the usual sectors of interest, 15 percent of respondents said impact funds will be among the strategies they will “focus most of their attention on”. This is a big leap from last year and puts impact on a similar footing to secondaries and direct lending (both of which were 15 percent). Energy funds? Three percent.
  • Surprise, surprise: by far the most popular sectors for specialist funds next year will be healthcare and technology.
  • Renewables is the most popular niche in the energy market, for the first time since Probitas has been asking the question.

Stay tuned for the results of Private Equity International‘s annual investor survey, Perspectives, this week.

Navab alumni
What became of the talented bench that had been lined up to build Navab Capital Partners? The firm – founded with great promise in early 2019 by KKR’s former head of Americas private equity Alex Navab – broke up following Navab’s tragic sudden death in mid-2019. Buyouts’ Kirk Falconer has been tracking the senior execs who had lined up for the firm. They are popping up in some interesting places:

  • Ex-Navab partner Bob Berlin (formerly of hedge fund Baupost and PE firm JH Whitney) has established LongRange Capital. The firm is in business, having secured a $1.5 billion commitment from California Public Employees’ Retirement System.
  • Annette Rodriguez, another Navab partner and former Warburg Pincus managing director, has co-founded MKH Capital Partners, which will make investments in US and Latin American mid-market businesses on behalf of two family offices.
  • Ex-principal at Navab Sunny Patel, whose pre-Navab career included investment roles at 3G Capital and KKR, signed up to HighPost Capital as a managing director, according to his LinkedIn profile. Highpost appears to be a consumer, lifestyle and sports-focused PE firm founded by Mark Bezos (brother of Amazonian Jeff) and Falconhead Capital founder David Moross.

Register or subscribe to sister title Buyouts for more detail.

SPACs in context
A trio of French investors, including telecoms magnate Xavier Niel and former Lazard banker Matthieu Pigasse, have just set up a special purpose acquisition company targeting European consumer goods. The new vehicle, 2MX Organic, will be listed on Euronext Paris and is seeking to raise up to €300 million to invest in environmentally friendly consumer companies in Europe. The subscription period for the first offering began on 30 November and runs until 7 December. The founder will collectively own about 30 percent of the company after the listing. In an interview with The Irish Times, Pigasse said the first deal should be worth “around €2 billion”, which will serve as a platform for subsequent deals.

European investment group Investindustrial set up its own SPAC, Investindustrial Acquisition, in October and is seeking to raise up to $350 million. It will target businesses in the consumer, healthcare, industrial and tech sectors with enterprise values between $1 billion and $5 billion.

According to SPAC Research and White & Case, 140 SPACs have been listed in the US so far this year. These vehicles have raised more than $55 billion, far surpassing the 59 SPACs that raised about $13 billion in 2019. Despite signs of interest in Europe, the Middle East and Africa, these volumes have yet to translate across the Atlantic. Scott Kleinman, co-president of Apollo Global Management, noted at the Milken Institute Global Conference in October that SPACs are more than just a fad or a bubble, but are poised to become a permanent asset classBuyouts reported (subscription required).

Read Buyouts’ deep dive on SPACs here (subscription required).

They did the math

Valuation amelioration. Almost half the GPs surveyed as part of sister title Private Funds CFO’s fees and expenses survey have made changes to valuation policies after an intervention by the US Securities and Exchange Commission. In 2018, only 7 percent had done so. Register or subscribe to Private Funds CFO to access the full results.

Essentials

Mumbai low; sell high
Indian private equity is on a tear, in part due to covid-19. The country had 703 deals as of mid-November, surpassing last year’s 667, according to Refinitiv. Even excluding the $15.7 billion invested in telecoms provider Jio Reliance in July, the $6.8 billion deployed during the first 11 months of the year means the country is still on track to match or exceed the $7.3 billion recorded in 2019. Pharma is among the largest beneficiaries, attracting the likes of CarlyleKKR and Advent International, to name but a few. “If you look at certain sectors like pharmaceuticals, which are the first line of defence from covid, your business has actually picked up tremendously,” Neeraj Bharadwaj, a Mumbai-based MD at Carlyle, tells PEI. “And so people want to raise capital to capture that opportunity.”

Germany in goal
Private equity has one of Europe’s top football leagues in its sights. Advent International and BC Partners are among firms that are looking to acquire a stake in Germany’s Bundesliga International, Bloomberg reported last week (paywall). Germany’s football league will discuss the proposals next week, which “could include” interest from CVC Capital Partners, KKR and Bain Capital, according to the report.

For private equity sponsors, a combination of rising valuations of sports teams and leagues, a need for liquidity on the part of original owners and stakeholders, and a highly fragmented industry that could benefit from greater operational improvement and efficiencies, has turned investing in sports into an attractive bet, as we explored in our Deep Dive last month.

Dig deeper

Institution: Washington State Investment Board
Headquarters: Olympia, US
AUM: $111.5 billion
Allocation to alternatives: 46.9%

Washington State Investment Board has committed $1 billion across three private equity vehicles at its November retirement board meeting, a contact at the pension informed Private Equity International.

The commitments comprised $600 million to GTCR Fund XIII; $200 million to Monarch Capital Partners V; and €170 million to Providence Strategic Growth Europe. The commitment to Monarch Capital Partners V, managed by Monarch Alternative Capital, represents a new relationship with the pension.

The $111.5 billion US public pension has a 23 percent target allocation to private equity that currently stands at 21.4 percent.

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


Today’s letter was prepared by Toby Mitchenall with Adam LeCarmela Mendoza and Alex Lynn.

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