Side Letter: Japanese LPs on ESG, PE’s ‘big moment’, Sun Capital spin-off

Despatches from our Responsible Investment Forum in Tokyo and the BVCA's annual summit. Plus: a new firm from Sun Capital execs and exclusive people moves in the advisory community. Here's today's brief, for our valued subscribers only.

They said it

“There is a lot at stake”

Michael Moore, director general of the British Private Equity & Venture Capital Association, on the industry’s reputation amid the current crisis (see below)

Just happened

The responsible choice

To screen or to engage? That is the question faced by institutions when considering the impact of their investment dollars: whether ’tis nobler in the mind to avoid problematic industries altogether – and by opposing end them – or use their capital to influence positive change in those industries?

Japanese institutions are in the engagement camp, says Satoshi Ikeda, chief sustainable finance officer at Japan’s Financial Services Agency. Speaking at Private Equity International’s Responsible Investment Forum: Tokyo earlier today, Ikeda said domestic LPs have little interest in screening for controversial sectors and instead are disproportionately skewed towards corporate engagement and shareholder action. This dynamic is unlikely to change, he added. Screening is the most popular environmental, social and governance strategy globally, accounting for two-thirds of sustainable investing AUM, according to research from the Global Sustainable Investment Alliance.

Read how CalSTRS and CPPIB view the issue here.

Private equity’s ‘big moment’

Private equity and venture capital are facing their “big moment” in the economic recovery after covid-19, said Michael Moore, director general of the British Private Equity & Venture Capital Association, in his opening remarks this morning at the organisation’s annual get-together (virtual this time). “The pandemic has served as a reminder that our industry is both an economic force and a social one,” he added. Climate change, social challenges and the prospect of further upheaval following the end of the Brexit transition period will also test how the PE industry conducts itself. “There is a lot at stake,” he added. “We have high expectations of ourselves and they are matched by our stakeholders and government.”

I-banks eye secondaries 

Over in investment banking, different franchises are ‘tooling up’ to compete as advisers to the growing secondaries market. In its latest scoop, sister title Secondaries Investor details how Jefferies has hired two senior members of Greenhill’s secondaries advisory team – managing directors Brenlen Jinkens and Scott Beckelman – to launch its push into the sector. The investment bank’s entry into the market follows those of firms including Aviditi Advisors, Swiss interdealer-broker Tradition and Guggenheim Partners, which have all hired secondaries professionals this year to launch advisory units. Subscribers to Secondaries Investor can read more here.

Dig deeper

Institution: Maryland State Retirement and Pension System
Headquarters: Baltimore, US
AUM: $54.7 billion
Allocation to alternatives: 26.1%

Maryland SRPS has invested up to $1.65 billion to private equity funds for 2020, according to an investment committee document from its September meeting.

Some $675 million worth of private equity fund commitments were made during Q1 2020, PEI previously reported.

For the remainder of the year, Maryland SRPS committed to investments across sectors such as such as TMT, transportation and consumer goods that use buyout, debt or distressed strategies.

As illustrated below, private equity makes up 14.3 percent of the institution’s $54.7 billion investment portfolio.

For more information on Maryland SRPS, 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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