Side Letter: LPs feeling liquid, writedown wrap-up, struggle for state aid

How various firms' writedowns stack up and LPs are getting more comfortable with their liquidity positions. Here’s today's brief, for our valued subscribers only.

He said it

“It gets everyone in the market.”

Miles Otway, a private equity partner at Connection Capital, comments in the Financial Times (paywall) on how EU state aid rules are stopping many PE-backed businesses in the UK accessing the Coronavirus Business Interruption Loan Scheme. The rules preclude the provision of aid to companies deemed to be “in distress”; due to the capital structure used, leveraged buyouts often fall into this category, the paper reports.

Just happened

LPs hunker down

Investors are getting gloomier about the economic fallout of the coronavirus, but more comfortable with their own liquidity positions, according to two surveys by advisory firm Campbell Lutyens. Half of the LPs polled in April believed the current crisis is worse than the GFC, while 31 percent believed it is too early to tell. This shows a worsening of sentiment from the same survey in March.

On the flipside, the proportion of LPs who were either worried about liquidity (31 percent) or already liquidity constrained (12 percent) in March, has dropped to 21 percent and 8 percent respectively for April. Most LPs (55 percent) are unconcerned.

“We see widespread LP defaults as unlikely,” notes the Campbell Lutyens report, citing two reasons: the reputational and financial consequences for LPs, and the range of liquidity solutions available through the secondaries market.

We did the math

Writedown round-up. Firms including Apax, Blackstone, Carlyle Group and KKR have reported falls in their private equity portfolios this year amid the combined impact of covid-19 and a rout in oil prices. Here’s how the PE NAVs declined in Q1.


More on state aid. LPs want in on public-backed bailouts and are adamant that state aid is used as intended – to preserve jobs and not end up in the hands of PE executives, as we’ve written here and in a follow-up piece to come today. But GPs who are able to do so (the FT notes PE firms are mainly shut out from bailout loans) must think carefully about whether the potential impact of not tapping these funds outweighs the risk of political ramifications down the line.

PE slump. Some grim and unsurprising numbers through Jan-April in Bain & Co’s latest industry report: buyout transactions are down 60 percent, while exits slumped 72 percent. Fundraising across strategies has been decent with $287 billion thus far. The consultant’s conclusion: fundraising totals will fall by year-end and deals made during and after the crisis are likely to produce strong returns in the long-term.

Rich List roster. There were some familiar names in the Sunday Times Rich List, an annual tally of the 1,000 wealthiest individuals in the UK, over the weekend: Jeremy Coller (418th with £310 million: $380 million; €346 million), described as “probably the highest-profile vegan in the private-equity world”; Atomico’s Niklas Zennstrom (102nd with £1.4 billion), the Skype founder who we profiled in 2018; and Sir Ronald Cohen, co-founder of Apax Partners and an influential voice in the impact investing sphere, who with his wife Sharon Harel was 555th (with £220 million).

Calling all CFOs and talent chiefs! We would like to invite you to participate in the annual Holt MM&K Buyouts PE/VC compensation survey. European firms should contact, while North American firms should email Matt Cutler at

Dig deeper

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Headquarters: Saint Paul, US
AUM: $91.5bn
Allocation to alternatives: 10.77%
Bitesize: $100m-$200m

Minnesota State Board of Investment has issued a request for proposal for consultants to fulfil its investment needs across private equity, private credit, real estate, real assets, hedge funds and other alternatives. Although Minnesota SBI will consider one consultant to meet all of its private market investment needs, it is open to selecting multiple consultants to satisfy one or more of the private market categories.

For more information on Minnesota SBI, 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 Markham, Adam Le, Carmela Mendoza and Alex Lynn.

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