Side Letter: More on Alaska’s alts team, Tikehau’s new partners, Bain and McKinsey reports

More details on the restless alternatives team at Alaska's sovereign wealth fund. Plus: notes from Bain's and McKinsey's annual reports and nuggets on Tikehau, AP4 and Blackstone. Here’s today's brief, for our valued subscribers only.

Just happened

First a heads-up: Private Equity International‘s Carmela Mendoza will be heading to Berlin later this week. Drop her a line if you want to connect.

Alaskan breakaway

Ice Calving glacier

PEI’s Adam Le has unearthed some more details about Alaska Permanent Fund’s potential spin-out of its alternatives business:

  • The SWF is understood to have received interest from active public equities managers that are keen to build their private markets and alternatives capabilities.
  • Alaska is not considering outsourcing its private markets activity completely to a third party, we understand.
  • Its alts business managed almost $19 billion as of the end of December, with PE accounting for more than half of the unit’s AUM.
  • The $68 billion fund is struggling to retain and attract staff; the unit only has the equivalent of 3.5 full-time investment professionals, some of whom have received offers from rivals at 2.5 to 3.5 times annual compensation – and its CIO’s salary pales in comparison with those of other North American institutional investors.

Don’t be surprised if this time next year APFC’s alternatives allocation is being managed by a newly formed independent entity (of which the SWF owns a slice). Read more here.

According to the consultants …

It’s the time of year when the industry’s consultants of choice churn out their biblical annual private equity market reviews. McKinsey & Co’s Global Private Markets Review last week was followed this morning by Bain & Co’s Global Private Equity Report.

Chiming with a current conversation (see last week’s Friday Letter), Bain asks whether PE is losing its advantage over public markets: “Will convergence in 10-year returns make it harder to raise the next $2 trillion?”, which is the angle picked up in this morning’s Financial Times (paywall). The convergence is evident in the US, but not so in Europe, Bain says, quoting research from Josh Lerner and State Street. What’s more, the convergence will likely not last, says the report: “Given the historic sell-off in the wake of the crisis, US stocks were teed up for an equally historic rebound.”

As Claudia Zeisberger wrote for us last year: “Not all 10-year periods are created equal.”

Other notes from the reports:

  • The number of take-private deals was at a post-crisis high in 2019, but the combined value of those deals was still less than half that of 2006, notes Bain
  • Last year, fundraising for vehicles that buy stakes in GPs nearly tripled to $9.4 billion in 2019, from $3.4 billion the year before, says McKinsey
  • In the last five years, the average age of the top executives at the 10 largest firms has dropped from 56 to 51, says McKinsey

Don’t forget: our 40 Under 40: Future Leaders of Private Equity will be announced online and published in our Future of Private Equity special on 1 May. Nominations are now open.

He said it

“The AP Funds should be given expanded opportunities for direct investments in unlisted assets, such as co-investments and side investments in unlisted companies, investments in unlisted infrastructure companies, and investments in unlisted credits”

Niklas Ekvall, chief executive of AP4, describes in the Swedish pension’s annual report the “urgent” need to change its investment rules to allow it to compete with other large pension funds.

Essentials

Tikehau’s third-party capital. More has emerged on listed firm Tikehau Capital‘s plan to bring in third-party investors. LGT Capital and Montana Capital Partners were among nine LPs to invest in a portfolio of six growth-stage assets from the Paris investment manager’s balance sheet and make a blind-pool commitment to a growth fund in market, Secondaries Investor reported. LPs willing to offer more primary capital were given preference. Five Arrows, the secondaries unit of Rothschild Merchant Banking Group, is the lead investor. “Third-party management is generally better understood by analysts – they tend to attach more value to the fees that come with third-party asset management [as opposed to the capital growth associated with private equity],” said a source familiar with the firm’s plans.

Blackstone infra in the UK. The giant alternatives manager has hired Jonathan Kelly from rival Brookfield to spearhead its infrastructure investment activity in Europe, the FT reports (paywall). The move chimes with comments CEO Jon Gray made to PEI last week about the attractiveness of the UK: “Although Brexit has resulted in lower growth, between the currency movement and the stock market, you’ve seen pretty dramatic underperformance from a valuation standpoint.”

Dig deeper

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


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Today’s letter was prepared by Toby MitchenallIsobel MarkhamAdam LeRod JamesCarmela Mendoza and Louise Fordham.


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