Side Letter: KKR’s industrial impact, the US mid-market fight-back, Rede hires

On KKR's industrials employee equity share. Plus: the birth of Odysseus Investments, the revival of the US mid-market and hires at Rede Partners. Here's today's brief, for our valued subscribers only.

They said it

“The new world of virtual meetings makes it easier to connect, but makes it harder for GPs and advisors to assess the fundraising progress quite as well. This is important when a GP is in mid-fundraise – trying to assess real demand and how many more LPs we’d need to speak with becomes slightly more difficult to judge.”

Campbell Lutyens’ Andrew Bentley on one of the complications brought about by the switch to virtual due diligence. Read the full report here.

Just happened

KKR and financial inclusion

In the latest example of the KKR Industrials team’s employee ownership model in action, KKR-backed Ingersoll Rand, an industrial air pumps and compressors provider, has awarded a $150 million equity grant to nearly 16,000 employees worldwide (equal to 20 percent of an employee’s annual base cash compensation) to celebrate the merger between its industrial segment and KKR portfolio company Gardner Denver. The grant excludes management and is “primarily for our hourly employees”, industrials unit head and Americas co-head Pete Stavros says in a LinkedIn post. This follows a $100 million grant issued for Gardner Denver employees when the company returned to the public markets in 2017.

KKR’s industrials team is occasionally cited as a pioneer when it comes creating a positive impact. As we noted back in 2018 after hosting an impact investment event: “One consultant – an impact expert – said the best examples of impact investing he had seen were by KKR’s North American industrials team. Why? Because its value creation approach involves cleaning up messy businesses, making them safer places to work and giving a large portion of the equity to the entire workforce.”

New firm alert

Adam Battersby, formerly head of global principal investments at BofA Merrill Lynch, has emerged at the helm of a fledgling firm, Odysseus Investments. According to the press release, the growth investor “will focus primarily on opportunities in finance, insurance and real estate sectors”. It will look for investments with “a core focus to drive digitisation of traditional finance and technology sectors”. The firm is being launched by – and will invest the capital of – parent organisation Reech Corporations Group.

The US mid-market returns

It was an extremely tough second quarter for the US mid-market as the coronavirus pandemic tore through the nation. We’re not out of the woods yet, but practitioners speaking to us for our annual US Mid-Market special report are starting to see opportunities as the deal market comes back to life. Businesses in sectors that have been less badly affected or even prospered, such as tech, could make for attractive targets, while those that have been harder hit could represent some bargains. In a tricky deployment environment, managers have also been getting creative, looking at add-ons, minority investments and private investments in public equity. Check out the full PEI US Mid-Market 2020 report.


Rede up

Placement agent and secondaries advisor Rede Partners has hired three-decade Boston Consulting Group veteran Eric Ellul as chairman, it said in a statement, and added two to its advisory team.

LPs: your perspectives, please!

In its ninth year, Perspectives is Private Equity International’s annual study of how institutional investors will approach private equity over the coming year. If you are an institutional investor, your participation in the study is greatly appreciated. Click here to participate. It takes less than 10 minutes and in return you will get a complimentary copy of the full results. A $5 donation to UNICEF will be made for every completed set of responses, with your answers remaining strictly anonymous. For any questions, please email Nicole Douglas, head of investor research:

Dig deeper

Institution: Iowa Public Employees’ Retirement System
Headquarters: Des Moines, United States
AUM: $35.4 billion
Allocation to alternatives: 22.69%

Iowa Public Employees’ Retirement System has confirmed an increase in its target allocation to private equity from 11 percent to 13 percent, according to minutes from the pension’s September 2020 investment board meeting.

IPERS’ investment board has approved a plan to strategically boost its target allocation across all its private markets assets in order to pursue higher returns than are predicted under its current target allocations.

The $35.4 billion US public pension has also increased its target allocation to private debt from 3 percent to 8 percent; and private real assets (comprising private real estate, infrastructure and agriculture) from 7.5 percent to 8.5 percent.

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

Today’s letter was prepared by Toby Mitchenall with Isobel MarkhamAdam LeRod JamesCarmela Mendoza and Alex Lynn.

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