Side Letter: Moonfare mulls M&A; Secondaries advisers proliferate; AIMCo’s PE appetite

A proliferation of tech-enabled fundraising platforms could result in a wave of consolidation led by industry leaders. Plus: The latest advisory survey from Secondaries Investor goes some way to explaining a spate of new intermediaries, and why GPs should take heart from Alberta's private equity appetite. Here's today's brief, for our valued subscribers only.

Just happened

Moonfare mulls M&A
You could be forgiven for losing track of the growing number of tech-enabled fundraising platforms helping to democratise the private markets. Such businesses are increasingly important tools in private equity’s efforts to capture private wealth capital at scale: a back of the napkin calculation suggests that three of the largest – iCapital Network, Moonfare and Bite Investments – already have at least $130 billion of platform assets between them. Their success has no doubt contributed to the rising number of new entrants to this space, such as Japan’s LUCA last year.

New platforms were one of the topics du jour when Side Letter caught up with Moonfare founder Steffen Pauls last month. “When we started in 2018, I was becoming a bit insecure because we launched our operations but there was no one else doing the same, so I thought maybe we are taking the wrong direction,” he said. “Then suddenly starting in 2019… up to today we saw some 50 copycats globally and there’s literally no week where we are not coming across a new venture or a new company trying the same. I like everyone who’s sharing our mission… having said that, if you think long term, of course there is no reason for… 50 or 100 platforms in the world.”

Like any maturing industry, consolidation seems inevitable – not least because the time and resources involved in partnering with many small organisations is one of the main deterrents to GPs embracing private wealth. Platforms that can offer access to many private banks and wealth managers across a number of regions in one fell swoop are therefore likely to be at an advantage.

“We are all in a scale-driven business, so what I expect to happen is consolidation at some point in time,” Pauls said. “And of course if the time is right, plus valuations are in a reasonable expectation level – which was not the [case]… five months ago – M&A or inorganic growth is clearly our expansion plan. Not to buy assets… but to buy talent and maybe licences and go faster to market. I expect there to be, max, five platforms similar to ours on a global basis, no more.”

The value of good advice
Speaking of new entrants, secondaries intermediaries also seem to pop up every month. The latest advisory survey from our colleagues at Secondaries Investor goes some way towards explaining why (registration required). In a year where total secondaries transaction volumes hit roughly $130 billion – the first time they have exceeded $100 billion – firms such as EvercorePJT Partners and Credit Suisse more than doubled the volume of deals on which they advised. Other, smaller firms showed similarly impressive increases.

Eaton Partners and William Blair are among those to have added secondaries advisory executives or teams over the past year. The latest entrant is placement agent FIRSTavenue, a credit and infrastructure specialist, which placed partner Nick Chronias in charge of its new capital solutions group, Secondaries Investor reported last week.

As one secondaries buyer noted in April, last year’s build-out is as much about banks defending their share of the M&A market as looking to cash in on the secondaries boom: “They don’t want to lose the mandate. We’ll see if any of these [shops] buy a business or build a whole private markets team including secondaries, primaries, which means they actually want to compete.”

Sources tell Side Letter the market has slowed a little so far this year, with a decline in public stocks causing deals to be repriced or put on ice until volatility abates. At the same time, secondaries buyers are in no rush to commit capital after filling their boots in 2021, causing something of an impasse. These dynamics don’t seem to be filtering through to recruitment: Side Letter has heard stories of executives on both the buyside and advisory side being offered eye-watering figures simply to jump ship.


AIM-ing high
In today’s congested fundraising environment, it’s not often that you hear about a North American LP developing an even heartier appetite for private equity. Enter: the Alberta Investment Management Corp. Like many of its peers, the C$168 billion ($130 billion; €123 billion) pension system committed or deployed C$2.7 billion in the global market last year, a record amount, Peter Teti, head of PE and international, tells our colleagues at Buyouts (registration required). On top of vigorous investing, AIMCo earned a one-year net IRR of 65.9 percent for 2021. Unlike many of its US pension neighbours, however, last year’s activity and returns, combined with today’s environment, hasn’t left AIMCo bursting at the seams; rather, it wants more.

PE today makes up about 6 percent of all AIMCo assets, a relatively low share among Canada’s largest pension systems. Teti hopes to increase it by focusing “on the long term to deliver an outsized return”. The goal will be supported by several fresh initiatives, including larger, more meaningful co-investments; more deals with non-fund investors, such as family offices; the launch of its first office in Asia; and, in what is likely to be music to the ears of many GPs, the expansion of the number and mix of fund partners to encompass areas such as growth equity and secondaries. AIMCo is, of course, just one example in a sea of LPs. Still, GPs having a tough time on the fundraising trail may well take heart knowing there are still investors out there with an appetite (and, more importantly, capacity) for extra helpings.

Dig deeper

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

27 June

28 June

29 June

30 June

Today’s letter was prepared by Alex Lynn with Rod James.