Side Letter: Onex’s fund pause; EQT’s semi-liquid launch; PE’s NAV loan love

Onex is sticking a pin in efforts to raise its latest flagship. Plus: details of EQT's semi-liquid alts offering and private equity's love of NAV financing is being driven by demand for DPI. Here’s today's brief, for our valued subscribers only.

Just happened

A pause until fundraising thaws
It’s no secret that a good number of private equity flagships are likely to close below target this year. Now, however, it appears that some may not be raised in 2023 at all. Bobby Le Blanc, chief executive of alternatives giant Onex, said on a Friday earnings call that the firm had made the “tough but strategic” decision to pause fundraising for Onex Partners VI. Doing so will allow the firm to focus on operating company value and realisations within the portfolio “until we resume fundraising”, he added, noting that it will continue investing with the remaining capital in Fund V, LP co-investments and Onex’s balance sheet. Our colleagues at Buyouts listened to the call (registration required).

The now-paused Fund VI had collected an initial $2 billion as of November, of which $1.5 billion came from the Toronto firm itself, Le Blanc said in a Q3 earnings call. A second close had been anticipated for early this year. The firm’s 2017-vintage Fund V raised $7.15 billion, ahead of a $6.5 billion target.

Onex isn’t alone in pausing fundraises this year, though other examples appear to have been in smaller fund families. In March, TA Associates paused fundraising on its third Select Opportunities Fund to reduce operational complexity and focus more of its attention on its flagship TA XVSide Letter noted at the time. Managers are struggling with two significant issues as it relates to fundraising – existing investors are writing smaller cheques compared with predecessor funds and, when it comes to bringing in new investor commitments, the bar for new relationships is a high one.

Distributions, or a lack thereof, are also playing a role: while Onex continues to have the support of long-standing fund investors, Le Blanc said, “they want to see more return of capital”. Realisations appear to be slowing across the board. Some firms, like EQT, have begun to explore alternative means of generating liquidity for investors to mitigate the impact of slowing distributions. Onex’s latest move suggests EQT may soon have company.

EQT yesterday launched Nexus, its semi-liquid strategy targeting individual investors. With a minimum investment of €25,000 (which will differ in geographies due to regulatory restrictions), institutional and individual investors can access EQT’s PE and infrastructure funds via a single fully funded investment. The strategy will offer exposure to EQT’s flagship fund, growth, life sciences, the APAC-focused BPEA EQT unit, venture and value-add infra, as well as co-investments, a spokesperson told Side Letter. There is also an option to acquire secondary stakes when it makes sense from a portfolio construction perspective, however, this is expected to be minor.

Here are some other things to know:

  • EQT Nexus will initially be available in Europe and APAC.
  • Target net returns are between 12-15 percent.
  • Investors have the option to subscribe on a monthly basis and request redemptions on a quarterly basis, subject to redemption limitations.

The Northern European giant first revealed plans to launch semi-liquid strategies in January. Distribution of its semi-liquid offerings will initially come via banks, as well as family offices and private wealth clients.


NAV a Rede of this
As more traditional sources of financing dry up or become too expensive to pursue, the NAV loans market has emerged as something of a safe haven. That’s according to a recent survey of 19 lenders by placement firm Rede Partners, which found that while the leveraged loan market tightened last year, the NAV loan market only saw a minor drop in the total value of loans extended.

Our colleagues at Private Funds CFO report (registration required) that the overall leveraged loan market in North America had a 24 percent drop in volume in 2021-22, while high-yield bond issuance dropped 78 percent. NAV lending, however, fell by only 12.5 percent, with the number of transactions increasing. The weighted average number of deals done by each lender rose from four to five, according to the survey.

NAV lending’s comparative resilience has been largely driven by market participants finding creative uses for the tool, PF CFO notes. NAV loans were originally marketed as defensive tools that could be used to bolster struggling portfolio companies; today, an increasing number of borrowers are using the facilities to increase DPI. This has been compounded by GPs seeking to raise capital amid slowing exit activity and sinking valuations. Some 61 percent of respondents to Rede’s survey said they’d seen an increase in the number of NAV deals used solely for the purpose of increasing DPI.

Moonfare’s biggest shot
Retail fundraising platform Moonfare has raised its largest ever fund. Moonfare Core Portfolio II raised at least €100 million from more than 750 individual investors and stepping up from its predecessor vehicle by one-third, according to a statement seen by Side Letter. Core II offers access to top-tier private equity funds such as Apax Partners, EQT, Lexington Partners and Permira across strategies including buyout, secondaries and co-investments to individual investors investing at least €50,000.

Dig deeper

Institution: New York State Common Retirement Fund
Headquarters: Albany, US
AUM: $242.3 billion
Allocation to private equity: 14.73%

New York State Common Retirement Fund has allocated $538.3 million to seven private equity vehicles.

Buyout fund KSL Capital Partners CV II 3, managed by KSL Capital Partners, received $48.3 million. $30 million each was committed to PVP Fund IV and Primary Select Fund III, two venture capital funds managed by Primary Venture PartnersInsight Partners Fund XI Follow-On Fund, a growth equity fund, received a $50 million commitment.

Additionally, up to $30 million was allocated to two funds managed by GreenPoint Partners: $10 million to GreenPoint Real Estate Private Equity I and $20 million to GreenPoint TVP Partnership. The Apollo Excelsior PE Co-Invest, managed by Apollo Global Management, received a $350 million commitment.

NYSCRF’s recent commitments have focused on buyout, growth equity and venture capital strategies, focusing on various sectors.

NYSCRF allocated 14.73 percent of its total portfolio to private equity, amounting to $35.69 billion.

For more information on New York State Common Retirement Fund, as well as more than 5,900 other institutions, check out the PEI database.

Today’s letter was prepared by Alex Lynn with Carmela Mendoza, Adam Le and Helen de Beer.