Side Letter: KKR welcomes ESG regs; Neuberger’s impact milestone; Carlyle’s mega-fund

KKR's co-head of global impact says the firm has identified five future ESG challenges for which it would welcome regulation. Plus: Neuberger Berman has closed its debut impact vehicle and Carlyle has another mega-fund on the way. Here's today's brief, for our valued subscribers only.

They said it

“It doesn’t mean that individual private equity deals don’t make sense because they can. But as an area . . .  the fees are too high. The competition is too great. These pension funds that are thinking this is going to solve our problem – well, it’s not”

Hunter Lewis, co-founder of Cambridge Associates and architect of the Yale endowment model, tells the Financial Timesthat PE and VC have become too crowded and the illiquidity premiums have been eaten up by large fees

Just happened

KKR welcomes ESG regs
KKR welcomes regulatory intervention when it comes to ESG. Speaking at a PEI CFO All Access conference last week, co-head of global impact and public affairs chief Ken Mehlman (above) said regulations such as the EU’s sustainability-related disclosures in the financial services sector are suitable tools for helping “push societies in a certain direction”, reports affiliate title New Private Markets (registration or subscription required). KKR has identified five future global challenges for which it would encourage the “right” regulation:

  • Climate change
  • Resource scarcity
  • Cyberattacks
  • Public health
  • Changes in how people work

With the US Securities and Exchange Commission also putting ESG firmly in its crosshairs under the Biden administration, KKR’s wishes may soon be fulfilled.

Neu kid on the block
Neuberger Berman has closed its debut impact vehicle after around two years of fundraising. The investment firm began raising the NB Private Equity Impact Fund in early 2019. Last year, during the initial stages of the pandemic, the firm asked investors to extend the fundraising period and this week it said it had held the final close on $280 million. Details on the strategy, per the press release, are as follows:

  • As of March 2021 it was 47 percent committed to co-investments, primary fund commitments and secondaries investments
  • Circa 35 percent of the fund’s leadership team are women or people from “underrepresented minority backgrounds”
  • Investments “are generally focused on essential products and services that contribute to social and environmental solutions”, with examples being a point-of-use water filtration and dispenser company “that is displacing plastic water bottles”, a “next generation broadband technology platform” and an online tutoring business
  • The manager will “track and share the fund’s impact metrics with limited partners”

Carlyle’s next mega-fund
Carlyle will seek at least $22 billion for its next flagship PE fund, Bloomberg  reports (subscription required). If successful, Fund VIII will be about 19 percent larger than the 2018-vintage Carlyle Partners VII. It comes as Carlyle seeks to raise $130 billion over the next four years. PEI caught up with its fundraising tsar Nathan Urquhart this month to discuss how the firm intends to reach this figure.

Essentials

Petershill’s Incline
Petershill, Goldman Sachs Asset Management‘s GP stakes unit, said last week it had acquired a stake in US mid-market buyout firm Incline Equity Partners. Pittsburgh-based Incline has raised $2.3 billion to date and completed 46 platform investments. This latest acquisition comes at a time of heightened scrutiny towards GP stakes thanks to a legal dispute between Dyal Capital Partners and some of its portfolio managers. Keep an eye out for a Deep Dive into this issue in next month’s edition of PEI.

Dig deeper

Institution: Teachers’ Retirement System of Louisiana
Headquarters: Baton Rouge, US
AUM: $24.04 billion
Allocation to alternatives: 37%

Teachers’ Retirement System of Louisiana confirmed a $50 million commitment to Roark Capital Partners VI at its April meeting, according to a contact at the pension.

Roark Capital‘s sixth flagship is seeking $5 billion in capital commitments. Fund V held its final close, also on $5 billion, in 2018.

TRSL has a 14 percent target allocation to private equity that stands at 18 percent. Its recent private equity fund commitments have predominantly targeted North American and transatlantic vehicles focused on buyout, growth and mezzanine investments.

For more information on TRSL, and more than 5,900 other institutions, check out the PEI database.


Today’s letter was prepared by Alex Lynn with Toby Mitchenall.