Side Letter: PDI Forum takeaways, 20mins with Schwarzman, family offices up directs

Participants from all corners of the private debt industry are gathering in New York for two days of engaging discussions. Luckily we were there to bring you the highlights. Here’s today's brief, for our valued subscribers only.

Just happened

Advice for LPs and GPs

Sister publication Private Debt Investor began its two-day New York Forum yesterday and our reporter Preeti Singh was there to get the lowdown. Here are three key things she learned which apply to the private equity market too:

  • GPs need a macro view. Many managers don’t take a view on the macroenvironment when they launch a fund. Having one would prove a differentiator because actions of central banks across the world always impact investments – private or public, LPs on a panel said.
  • LPs don’t want money back. Large asset managers sometimes return capital to LPs if it hasn’t been allocated or if the fund under-performed. LPs aren’t keen on this. A portfolio manager at a large US pension plan said they committed to managers because of the promise of returns that will help the plan achieve its actuarial targets of over 7 percent. The returned money does no one any good, the LP said.
  • Too many templates. Aside from the ILPA template, LPs include data requests on capital fees and underlying KPIs in their side letters. There are too many to deal with. LPs empathise with GPs and hope for a more streamlined processes, one said.

20 minutes with Schwarzman

Blackstone co-founder Stephen Schwarzman has been doing the rounds promoting his memoir (in case you need a reminder, it’s What It Takes: Lessons in the Pursuit of Excellence). PDI reporter Andrew Hedlund recently caught up with him to talk valuations and going big. Yes, the private equity mogul is worried about high prices for assets.

“Someone is always justifying a reason to pay more or do something that’s not necessarily the right thing to do,” Schwarzman says. He was candid about not revealing too much about the next big PE opportunity: “If I knew I wouldn’t tell you because there are no patents in finance.” We appreciate the honesty. Read more here.

Big return

Sustainable investment-focused Ambienta has exited Safim, a hydraulic systems components maker. The sale marked a whopping 80 percent IRR and a 3.6x return on investment for the firm, which acquired a controlling stake in Italy-based Safim in 2017, a source familiar with the deal tells us. Ambienta is investing its €635 million third fund.


US mid-market on tour. Blisteringly high valuations have prompted US mid-market managers to get creative with their approach to value creation. According to Vincent Fandozzi, Ardian’s head of North America direct buyouts, these solutions include analysing other managers’ portfolios to assess what is likely to be sold before it reaches an auction process. Firms are also embracing international co-operation, with some – Ardian included – pursuing European expansion for its US portfolio. This global approach is not without risk, as the latest from our US mid-market special explores.

Handy families. Family offices are taking a hands-on approach to heightened uncertainty around interest rates and returns. In net terms, 39 percent plan to make more direct private equity investments over the next year, according to the latest UBS/Campden Wealth Family Office Report. Around one-quarter are plotting to increase fund commitments and 16 percent will put more into real estate in 2020. Increased capital into PE is a good thing, but more investors going direct surely adds more fuel to the competitive fire. Are you seeing more family offices across the table? Let us know.

Dig deeper

Chicago requests. Chicago Firemen Annuity & Benefit Fund has issued an RFP for a private equity fund of funds, investing up to $30 million over three years. Below is a breakdown of the $877 million US pension’s total investment portfolio. For more information on Chicago FABF, as well as more than 5,900 other institutions, check out the PEI database.

He said it

“There are a lot of first-time South-East Asia funds raising capital as a result of the [China-US] trade war that really shouldn’t be getting funded.”

A senior executive at a US-based placement agent calls a spade a spade with PEI over tea this week.

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Today’s letter was prepared by Adam LeAlex Lynn and Preeti Singh.

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