Side Letter: Partners Group on tweaking the PE model

Side Letter: Partners Group on tweaking the PE model.

Just happened

Something to smile about

Partners Group’s results call this morning was unsurprisingly heavy with covid-19 discussion (more on that below). However, the firm also unveiled a potentially important shift in the way it engages with portfolio company employees.

Driven in part by the negative public attitude to PE (see our analysis of that here), Partners Group will discuss with its institutional clients a proposal to divert a percentage “of the value that is created” at its portfolio companies to employee programmes that could be in education, the environment, social initiatives or more straightforward financial support (a share in the profits at exit). There was also mention of a portfolio-wide hardship fund (sort of an internal insurance programme) to account for business failures and job losses.

Executive chairman Steffen Meister (pictured) posed the question: while private equity firms can credibly claim to outperform other ownership models when it comes to returns and job creation, can it claim to be better at engaging with employees? “I think we have to take a step back and agree: no we cannot,” said Meister. Why not? “It’s not a lack of willingness or intention. It is cost. These initiatives come with costs.”

Next the firm will discuss the plan with LPs before moving it forward.

On the subject of covid-19:

  • Portfolio: liquidity plans are “perhaps the most frequent conversation at the moment”, said co-CEO David Layton. “We have drawn many of [the revolving credit facilities] down at the asset level out of caution, and we have over $15 billion of dry powder available at the fund level.”
  • Dealflow: The firm is “widening its origination efforts into areas that were closed up until now”, said Layton. This includes public targets that had been “prohibitively expensive”, and privately owned business that require more capital: “It’s a little bit early, but I wouldn’t be surprised if you see us approaching owners of over-leveraged, solid assets with capital solutions.”
  • Fundraising: The firm declined to give guidance on how fundraising would be affected. Last year the firm raised $16.5 billion across its various programmes.
  • Operations: Hiring will be slow this year, not for financial reasons, but because PG’s process involves a lot of in-office face time, something not currently possible, the firm said.

An LP’s covid-19 pointers for GPs

Dutch investment firm Achmea Investment Management expects its GPs to have prepared a summary of measures in place in each of the geographies covering their portfolio companies and support them during this period, said senior portfolio manager Jos van Gisbergen. These include:

  • Where possible activated smart working;
  • Agreed holiday leave for as many employees as possible;
  • Where necessary, rent new spaces or used idle office space reorganising entire offices to guarantee maximum distance between employees;
  • Organise health checks for people returning from other affected countries and applied quarantine measures if necessary.

Late registration

The US Securities and Exchange Commission has allowed advisors (private funds included) to file their Form ADV late this year, amid covid-19 related disruption. The deadline is now 30th April.

They said it

“It is too early to assess the specific impact that the covid-19 pandemic will have on NBPE’s diversified portfolio, but we are monitoring the situation as closely as possible and will report more to you in this regard as soon as is practically possible.”

A sentence in a monthly nav update from listed vehicle NB Private Equity Partners underscores the time lag between public markets woes and private company valuations.

Essentials

Infra rainmaker. Park Hill fundraiser Daniel Zinic has moved in-house to help Stonepeak Infrastructure Partners finish raising its $10 billion fourth flagship fund. The firm is on the way to a $7 billion first close. Zinic was named as a rainmaker on Infrastructure Investor’s list of 20 most influential fundraising professionals. You can view the PEI list of 50 fundraising rainmakers – compiled in 2018 – here.

Inside tip

Have news or views you’d like to share with us, on this or else? We’d love to hear from you.

Dig deeper

Institution: Maine Public Employees Retirement System
Headquarters: Augusta, US
AUM: $14.90bn
Allocation to alternatives: 45.50%
Bitesize: $50m-$100m

Maine Public Employees Retirement System has approved a €30 million commitment to Summit Partners Europe Growth Equity Fund III, a contact at the pension informed Private Equity International. MainePERS has previously committed to funds VIII, IX and X of Summit Partners’ flagship global growth equity series.

For more information on Maine PERS, as well as more than 5,900 other institutions, check out the PEI database.


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Today’s letter was prepared by Toby MitchenallIsobel MarkhamAdam LeRod JamesCarmela Mendoza and Alex Lynn.


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