Side Letter: KKR anchors Atwater; Ardian’s iCap tie-up; impact-linked carry crew

KKR turns LP for an alum's media and entertainment fund. Plus: Ardian says 'oui' to more private wealth capital and another firm is tying carried interest to impact. Here's today's brief, for our valued subscribers only.

Just happened

Media investing: A perfect harmony between debt and growth? (Source: Getty)

 

Striking the right note
KKR might not be a name you’d typically associate with making LP commitments, though it does have a strategic partnerships team that makes primary fund commitments. One media and entertainment-focused PE fund appears to have caught the firm’s eye. KKR (through its balance sheet, we should note) and Goldman Sachs Asset Management‘s Petershill unit have anchored Atwater Capital‘s debut fund, according to a statement Side Letter has seen exclusively. Atwater Capital Fund I has so far raised $110 million and has a $600 million hard-cap, per an SEC filing.

Atwater was founded in 2017 by Vania Schlogel, a former KKR principal who served at the firm between 2009 and 2014. In the statement, KKR partner Alisa Wood called its commitment a “continuation of the great relationship we have built over many years of collaboration with Vania – from her time at KKR and beyond”. No stranger to the world of showbiz, Schlogel was also previously CIO at ROC Nation, rapper Jay-Z’s entertainment agency, and oversaw its acquisition of streaming platform Tidal.

Atwater styles itself as “operational capital” that leverages partnerships with creative management teams and other investors, Schlogel told Private Equity International last year. The firm’s existing portfolio include wiip productions, the studio behind shows such as Mare of Easttown, and Epidemic Sound, a music platform that became Atwater’s first unicorn investment in March 2021. In the statement, Schlogel said media and entertainment is “acyclical and buoyed by both digitisation and significant growth in global demand”.

Atwater isn’t KKR’s first foray into media investing – it acquired a $1.1 billion music portfolio from Kobalt Capital last year – nor is it first blue-chip firm to subscribe to the idea. Blackstone, for example, last year acquired a $1 billion music portfolio and a GP stake in London-listed investment firm Hipgnosis, while Apollo Global Management seeded media investment firm HarbourView to the tune of $1 billion. As Side Letter previously noted, the strategy sits at the compelling intersection of both private credit and growth investing. In other words, a perfect harmony.

We told you so
In February we posited that competition for private wealth capital in the PE industry could be about to intensify. This development stepped up a notch this week with investment giant Ardian saying it had partnered with alternatives retail fundraising platform iCapital. Ardian will provide access to its strategies on iCapital’s Allfunds platform, meaning more wealth managers and their clients can invest in the firm’s private equity, real assets and private credit funds.

What’s the market for private wealth capital? Blackstone raised around $50 billion of equity capital via its private wealth channel last year, while Apollo expects to raise around 30 percent or more of total capital in the coming years. For Ardian, almost 6 percent of its $141 billion in AUM comes from private wealth.

Say hello!
PEI‘s Carmela Mendoza will be at the BVCA Summit 2022 at London’s Landmark Hotel tomorrow. If you’re attending and keen to grab a coffee, she’d love to hear from you.

Essentials

Impact carry crew
The Drawdown Fund – a climate-focused growth vehicle – is the newest member of the impact-linked carry crew’s North American chapter, our colleagues at New Private Markets report (registration required). Drawdown is tying 50 percent of its carried interest to decarbonisation targets as it nears a first close on $100 million for its debut fund.

Linking carried interest to impact or ESG KPIs is much more prevalent in Europe – EQTApax PartnersTikehau and Meridiam are notable examples – and Drawdown is one of only a handful of US-headquartered firms to do so. Others in the US include infrastructure firm EIG and food-focused Paine Schwartz.

Drawdown is targeting $250 million for the fund, which will invest along three environmental themes: energy, food and agriculture, and urban decarbonisation. Some notes:

  • The fund operates on a 2-and-20 model for management fees and carry.
  • It will set targets for avoided or sequestered emissions for each portfolio company upon acquisition, and half of the eligible carry will be paid as determined by the portfolio company’s progress against these targets.
  • Drawdown has pledged to donate the balance to philanthropic climate projects to achieve the full intended impact.

Today’s letter was prepared by Alex Lynn with Adam Le and Madeleine Farman contributing