Side Letter: Megafunds boost H1 fundraising, dislocation Deep Dive, summer reads

Our first-half fundraising figures are out and they don't disappoint. Plus Blackstone's life science close and recommended reading for your summer vay-cay. Here's today's brief, for our valued subscribers only. 

They said it

“I’m not sure every bank really understands the risk they have on their books … there’s really no uniform underwriting methodology across all the banks.”

A banker talks to sister publication Private Funds CFO about the increased risk for lenders of subscription credit lines.

Just happened

Secondaries megafunds boost H1 fundraising

The PEI numbers are in: it was a strong start to the year on the fundraising front for private equity, with $241 billion gathered by 356 funds closing in H1. A few things to note:

  • The two largest funds raised were secondaries vehicles, meaning the sub-asset class is well-capitalised for what could be a flurry of dealflow in the second half;
  • Venture capital funds make up 40 percent of the 356 fund closes, with the $9.5 billion Insight Venture Partners XI the third-largest fund raised so far this year;
  • Funds in market at the end of H1 were targeting some $765 billion.

As we’ve noted, the number of large funds in market coupled with a flight to quality brand names driven by coronavirus-induced uncertainty (and the fact many H1 fundraising processes began well before covid-19 took hold) makes a strong H1 not as surprising as might be expected. Whether fundraising timelines stretch out in the quarters to come will be more telling.

Dislocation strategies deep dive

Our colleagues over on Private Debt Investor are taking a deep dive into dislocation strategies in their July/August cover story. These new funds have taken the market by storm amid the covid-19-induced downturn and have the ability to deliver the returns they’ve promised investors. Something that quickly came to the fore: the need for speed. Funds from KKR and Apollo were both raised in just eight weeks, giving investors little time to do due diligence. Investors were well prepped, however – over the last couple of years fund managers had been encouraging LPs to set aside capital for a downturn they felt they could see coming.

KIC looks abroad

Korea Investment Corporation has partnered with a local bank to pursue overseas co-investments. The $158 billion sovereign wealth fund has committed $300 million to a $400 million joint venture with Korea’s Nonghyup Bank, or the National Agricultural Cooperative Federation, according to a statement. The move is intended to boost returns through a reduction of fees. KIC has a 6.17 percent allocation to private equity, representing around $9.7 billion, according to PEI data.

We did the math

Secondaries in favour: Megafunds from Ardian and Lexington Partners accounted for 14 percent of the total capital raised in H1.


Blackstone in good health

Blackstone has held a final close on its inaugural life sciences fund, Blackstone Life Sciences V, on $4.6 billion. The vehicle has already made some sizeable transactions, including a $337 million strategic collaboration with Medtronic on its diabetes management products.

Summer reads: Triago’s Mathieu Dréan

Every day this week we’ll be sharing some book suggestions to take with you if you’re lucky enough to be heading on a summer vacation this year. We recently caught up with placement agent and advisor Triago managing partner Mathieu Dréan who recommends Vers la sobriete heureuse (English translation: The Power of Restraint) by farmer/philosopher Pierre Rabhi.

“[Rabhi] chose many years ago to live a very simple life, in the country, outside of the consumer society,” says Dréan, adding that he immediately thought of this book when the lockdown started. Rabhi’s message: “We drift a little away with the hectic pace of society… he’s promoting a simpler way of life. It’s inspiring.”

Dig deeper

LP meetings. It’s Monday, so here are some LP meetings to watch out for this week.

13 July

14 July

15 July

16 July

Today’s letter was prepared by Isobel Markham, Adam Le, Carmela Mendoza and Alex Lynn.

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