Side Letter: Leonard Green’s mega-GP-led; another OMERS PE departure

Leonard Green & Partners has closed one of the largest GP-led deals ever. Plus: Highlights from yesterday's AVCA conference and another departure from OMERS PE. Here's today's brief, for our valued subscribers only.

They said it

“GP consolidation is a positive development for the market… managers are thinking about themselves as businesses – not just about deal-doing – and really thinking about alignment with investors.” 

Clarisa De Franco, managing director & head of PE funds at CDC Group, weighs in on the trend of GPs buying their peers in a panel at the AVCA Conference 2021.

Just happened

Leonard Green’s mega-GP-led
How big can a secondaries deal get? The market answered this very question this week with the news that Leonard Green & Partners had closed a deal to move assets from its 2007-vintage fund into a continuation vehicle involving around $2.5 billion-worth of net asset value. According to affiliate title Buyouts (registration or subscription required), which broke the news, assets in the deal include Joann, AerSale, Authentic Brands Group and CHG Healthcare Services. Leonard Green’s process is shy of Nordic Capital‘s landmark 2018 secondaries process – intermediated by Campbell Lutyens – that led to the creation of a €2.5 billion continuation fund. But should secondaries deals be measured by the size of the resulting vehicle or the amount of NAV that changes hands? It’s a question we tackled here. In any case, this latest process is further evidence the GP-led secondaries market has even more room to grow.

AVCA conference takeaways
Side Letter tuned into day one of the African Private Equity and Venture Capital Association’s annual conference on Tuesday. Here’s what we heard:

  • Though fundraising dropped 69 percent to $1.2 billion last year, fortune may favour LPs bold enough to commit. “If you’re looking for returns, you need to be ahead of the rest,” said Haydee Celaya, co-founder of fund of funds manager Avanz Capital Partners. “You need to be on the frontier… and Africa is the frontier that investors are looking at.”
  • DFIs leveraged colleagues with feet on the ground, such as local pension funds, to navigate the pandemic, said Clarisa De Franco, head of PE funds at CDC. “That’s been critical to ensure we are able to maintain our ability to invest and manage the portfolio.”
  • Africa is best-placed for what a greater number of LPs are looking for – not just returns, but also impact, said Okechukwu Enelamah, chairman of PE firm African Capital Alliance.

Another OMERS departure
Makram Atiyah, a London-based director of OMERS Private Equity, left the firm this month, Buyouts reports. Atiyah joined in 2019 with a focus on portfolio company value creation. His departure is the second this year from Ontario Municipal Employees Retirement System‘s PE group, with healthcare head Tim Patterson having left in January. The unit, which oversees C$14.8 billion ($11.7 billion; €9.8 billion) of net assets, generated an 8.4 percent negative net return against a 9 percent benchmark last year.


On the BlackRock-Temasek tie-up
BlackRock and Temasek last week teamed up to launch a series of decarbonisation funds. The first has a fundraising target of $1 billion and the pair have jointly committed $600 million to it. Here’s a few additional details, courtesy of affiliate title New Private Markets (registration or subscription required).

  • Returns profile: Temasek CEO Dilhan Pillay told Bloomberg they’re aiming for 20 percent IRR. “We’re not going to look at sacrificing returns, but we may have to wait for a longer period,” said Pillay.
  • Where will they invest? They haven’t decided yet, and they aren’t inclined towards developed or emerging markets or particular regions, according to sources. But they’ll invest in industries like emerging and renewable fuel sources, grid solutions, battery storage and electric and autonomous vehicle technologies, and may consider biodiversity.
  • Who’s in charge and who’s on the team? The funds will be managed by BlackRock through a separate vehicle. BlackRock will bring some Temasek people onboard, move people internally and hire new, external talent to manage the funds. The investment committee will comprise individuals from both sides.

Dig deeper

Institution: Texas County & District Retirement System
Headquarters: Austin, US
AUM: $35.7 billion
Allocation to alternatives: 49.2%

Texas County & District Retirement System this month approved a commitment of $75 million to Vida Ventures III, according to the pension’s recent investment activity report. Vida Ventures is in market seeking $750 million for its third life and transformative science-focused fund. The Boston-based fund manager raised $600 million for the predecessor vehicle.

The $35.7 billion US pension has a private equity target allocation of 25 percent, which stands at 19.1 percent.

TCDRS’s recent fund commitments have targeted a variety of private equity strategies across multiple sectors and regions.

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

Today’s letter was prepared by Alex Lynn with Adam Le and Carmela Mendoza.