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Side Letter: OpEx winners, Apollo’s dry powder, Charterhouse on hiring spree

Today we reveal our Operational Excellence Awards 2019, celebrating the achievements of the industry’s best-in-class value creators. Here’s our latest brief, for our valued subscribers only.

Just happened

OpEx honour roll

A graphic showing a magazine coverIt is the eighth year of our Operational Excellence Awards and the entries are as impressive – and varied – as ever. As the market has advanced through the cycle, strategies such as buy-and-build have come to the fore, and so has understanding that these have to be carried out not just quickly, but also sustainably. As market participants scan the horizon for signs of a downturn, the best value creators have embraced challenges and emerged with tales worth telling. So congratulations to our 12 winners! Read about the value creation stories that impressed our global judging panel here.

Lower fees, please

What can growth equity and venture managers do to attract a larger pool of capital? Lower its management fees, according to a report from the British Business Bank and consultancy Oliver Wyman. “The high costs and carry associated with investment in VC/GE funds create a challenge for DC schemes trying to access the asset class,” the pair write, highlighting DC schemes’ budgetary and regulatory restraints. Worth noting for VC and growth equity GPs: total assets of UK DC schemes are estimated to reach £1 trillion ($1.2 trillion; €1.1 trillion) in a decade.

Enduring capital

Caledonia Investments, through its rebranded direct investment unit Caledonia Private Capital, plans to double down on longer-term direct investing. The firm, which owns a stake in multi-family office Stonehage Fleming, will make three investments every two years in UK-headquartered businesses valued between £100 million and £250 million, according to Duncan Johnson, head of its directs unit. “It is hard out there selling bog-standard private equity,” Johnson says. The firm, which invests from its balance sheet, isn’t into quick flips but wants to create enduring value to its businesses over time.

Essentials

Keepin’ dry. Apollo Global Management had around $44 billion in dry powder as of end June, co-president James Zelter tells sister publication Buyouts. The investment giant is holding onto the capital – which includes $34 billion for private equity – in anticipation of more volatility, says Zelter, who is CIO of Apollo’s credit business. “I’m building our business with the assumption that there’s going to be one of these dislocations, so with more mandates that allow us on a trigger event to put more capital to work,” he adds.

Full house. London’s Charterhouse has made a flurry of appointments this month. Investment manager Christine Ma, formerly of Bain & Co, joined in September, as did portfolio manager Yoeri Torel, who joined from Sabena Aerospace, according to public company filings. It follows the appointment of Michael McCotter, formerly of DH Private Equity, as head of tax and James Cocker, previously a partner at Lion Capital. Chrystelle Eid, an investment manager who joined last year, is understood to have departed for the public markets.

Small is uncertain. Smaller buyout funds have historically outperformed larger ones, but they are less of a sure bet, according to research by Pantheon. The investment manager found that small and mid-sized funds of vintage 2000-12 have outperformed mega-sized peers by a TVPI compounded annual growth rate of 5 percent. Returns, though, are more dispersed. “Sharp fund selection skills are required,” concludes co-author Andrea Carnelli Dompé.

Dig Deeper

NJDOI commits. New Jersey Division of Investments approved total commitments of nearly $400 million to three private equity funds during a recent board meeting. Here’s a breakdown of the $76.9 billion US pension’s current alternative asset allocation. For more information on New Jersey Division of Investments, as well as more than 5,900 other institutions, check out the PEI database.

A chart showing asset allocations for the New Jersey Division of InvestmentsHe said it

“The banks bore the brunt for the last 10-12 years and we’ve all sat back and watched it happen. If we are not careful, that regulatory pendulum can swing towards the private markets.”

Apollo’s co-president James Zelter tells sister publication Private Debt Investor’s New York Forum last week that alternatives asset managers need to up their lobbying game.


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Today’s letter was prepared by Adam LeRod JamesCarmela Mendoza and Preeti Singh.


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