Side Letter: Lockdown recruitment, Pollen St sale, denominator concerns

Even in lockdown, recruiting in PE continues. Plus: Pollen's minority stake sale, GPs' reaction to the covid-19 crisis and concern levels around the denominator effect. Here’s today's brief, for our valued subscribers only.

He said it

“Coming into this crisis there was a spotlight trained on private equity and that will continue … There are lots of opportunities for us to do well from a reputational standpoint by doing the right things during this crisis: how workers are going to be treated; our participation in certain industries. All of those can be positives for the industry, but there are also landmines out there.”

Steve Nelson, chief executive of the Institutional Limited Partners Association, says private equity should prove it’s a responsible form of ownership amid the covid-19 pandemic.

Just happened

No stop on hiring

With much of the world locked down, you’d be forgiven for thinking recruitment in the private equity industry was frozen. Not so, say two recruiters we spoke to for this 5-minute video. PE firms and placement agents are still hiring. Processes begun prior to the crisis are still live as firms want to hit the ground running when the crisis abates, the recruiters say. Top tips for job candidates interviewing via video link? Press mute when you’re not speaking, prepare as much as you can, and play it to your benefit. “People are real, they’re their normal selves,” when dialling in from their homes, says Simon Nixon, managing director at Carpenter Farraday. “You get the real person.”

Gathering Pollen

Spring is here. Capital Constellation – the JV between institutional investors to buy stakes in firms – has acquired a minority ownership interest in Pollen Street Capital and “will provide significant investment capital to support the continued growth of Pollen Street’s private equity and credit businesses”, the group said yesterday. Pollen Street is a European financial services focused firm, currently trying to raise £600 million ($750 million; €687 million) for Fund IV.

How GPs are reacting to covid-19

PEI’s latest covid-19 study gathered views from 120 GPs in March on what the spread of coronavirus means to their business. Here are some findings:

  • the majority of GPs currently deploying fund capital said they would not need to seek extensions to commitment periods;
  • more than 60 percent are being asked by LPs for more frequent reporting on portfolio company revenues;
  • more than half expect to make job cuts in their portfolio companies.

Find out more in this downloadable report.

They did the math

Eye on the denominator. Limited partners are generally “somewhat concerned” about the denominator effect, according to a survey by ILPA of around 200 of its members. That said, for 37 percent of investors it is “unlikely to be an issue”.

Essentials

Loss of Vision. SoftBank’s Vision Fund woes show little sign of abating. The Japanese tech conglomerate expects to post a ¥1.8 trillion ($16.8 billion; €15.3 billion) investment loss in the $100 billion fund for the Fiscal Year 2019, according to a statement on Monday. It blamed the drop on the deteriorating market environment. Vision Fund posted a ¥225.1 billion operating loss for Q3 FY2019 in February on the back of unrealised losses on its WeWork and Uber investments, among others. The performance has set back plans to raise a $108 billion successor to the Vision Fund and the company will first consider a smaller bridge fund to restore investor confidence.

Dig deeper

Institution: Tennessee Consolidated Retirement System
Headquarters: Nashville, United States
AUM: $75.70bn
Allocation to alternatives: 15.10%
Bitesize: $100m-$200m

Tennessee Consolidated Retirement System has confirmed $389.9 million commitment-worth of private equity commitments to multiple investment vehicles, as mentioned during the institution’s March 2020 Retirement Board meeting.

The commitments comprise of €220 million to BC European Capital Fund XI and $150 million to General Catalyst Group X, allocated to three different strategies: $40 million to General Catalyst Group X – Early venture; $65 million to General Catalyst Group X – Growth venture; and $45 million to General Catalyst Group X – Endurance.

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


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


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