Side Letter: Navab’s sweet spot, Buffett questions PE returns, TA’s big growth

Who's going to do those deals the mega-funds used to do until a decade ago? Alex Navab. Here’s today's brief, for our valued subscribers only.

Just happened

Navab takes root

Alex Navab (pictured) has found a sweet spot for his new firm Navab Capital Partners: between the mega-funds and those under $3 billion. He tell us he’s banking on the relationships, networks and experience his all-star team has built in that space to give the firm credibility with investors. While the firm is private-equity-centric, Navab expects it to expand into other strategies in time. But first, he is focused on building his team, setting elements of ‘culture’ and ensuring philanthropy will be an integral part of the organisation – and raising that $3 billion fund, of course.

Buffeted but not blown away

Private equity is used to taking barbs, but when they come from Warren Buffett they sting a little more than usual. His comments over the weekend created a mini-financial media storm (“Returns are really not calculated in a manner that I would regard as honest,” he said, per Bloomberg). The point he makes – that management fees are charged on committed capital, but returns are reported based only on drawn capital – is an old one but a good one. If you want something to counter the negative vibes from the sage of Omaha – and you have some train or plane time to fill – Forbes’s portrait of KKR’s Henry Kravis and George Roberts charts the changing face of private equity nicely. It also gives a glimpse of the impressive work the industrials team is doing on employee stock ownership under team head Pete Stavros.

Growth equity gets bigger

This is shaping up to be the year of growth equity: TA Associates hit the $8.5 billion hard-cap on its Fund XIII after just a few months on the road, adding to the $25 billion raised across the industry for the strategy in the first quarter. Investors are leaning in to growth equity in today’s world of high valuations: high growth plus low-to-no leverage makes the strategy an attractive proposition, particularly at this stage in the cycle.


Fundraising update. It might surprise you that a first-time manager raised the largest fund in April. Beijing-headquartered DCP Capital – founded by two KKR alums – pulled in $2.5 billion across its main fund and separate vehicles. See the month’s five largest fundraises here.

Talent scouting. KKR has partnered with Harlem Capital Partners to boost its recruitment of women and minorities. Early stage VC firm Harlem launched an internship programme last year for those under-represented in investment management and has since received 940 applications, resulting in 28 internships. Harlem will refer candidates and former interns to KKR for consideration in its internship or full-time hiring programmes.

Dig deeper

Want more data? There are more than 6,700 institutions in our database, including Navab Capital PartnersKKR and TA Associates from today’s Side Letter.

They did the math

EMPEA’s latest Global Limited Partners Survey reveals LPs view South-East Asia, China and India as the most appealing investment destinations across 10 emerging markets globally. Latin America (in grey) has tumbled from the top spot in 2015 to sixth place.

He said it

“It’s not as good as it looks.”

Warren Buffett has doubts over the way PE returns are calculated. He is not alone.

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Today’s letter was prepared by Toby MitchenallIsobel MarkhamPreeti Singh and Alex Lynn.

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