Side Letter: PEI Awards; SPACs v buyouts; CPPIB’s injection of fresh talent

PEI recognises the industry's top GPs, LPs, law firms and more over the past 12 months. Plus: SPACs and buyouts could be on a collision course and why Canada's largest public pension has made an unconventional pick for its new chief executive. Here's today's brief, for our valued subscribers only.

They said it

“Investors who are aware of fraud are compensated for keeping other unsuspecting investors in the dark (as they and the fund manager continue to profit from the fraud) and for not blowing the whistle to regulators.”

Writing in Forbes, former SEC attorney Edward Siedle discusses side letter provisions waiving fees for investors who agree to remain in a PE fund, not pursue fraud claims and not tell the other investors about the fraud.

Just happened

Awards season
It’s the moment you’ve all been waiting for! No, not the Golden Globes… the Private Equity International Awards 2020. Results are now live. Click here to find out which GPs, LPs, law firms and placement agents were named best in their respective regions during an unprecedented year for the asset class.

What new normal?
For all the talk of liquidity issues, fundraising woes and portfolio company triage last year, PE activity appears to have held up fairly well. That’s according to Bain & Co’s Global Private Equity Report 2021, published Monday. Carmela Mendoza reports here and below are some key takeaways:

  • Although buyout deal count fell 24 percent to 3,100 last year, total deal value climbed about 8 percent to $592 billion. The average deal size rose 24 percent to $776 million.
  • Nearly half of the $83 billion raised for SPACs last year is expected to compete for the same assets as buyout funds. Whether the former will continue to attract capital is likely to hinge on their performance.
  • Deal multiples in the US (11.4x) and Europe (12.6x) are at or near record levels.
  • Global exit value hit $427 billion in 2020, on par with 2019 and in line with the five-year average, thanks to an increase in transaction size.
  • Realised returns in 2020 (2.3x) compared favourably with the 2015-19 average of 2.19x.
  • Global buyout deal value in January and February this year is 60 percent higher than equivalent periods of the past five years, suggesting buyers are spending big in 2021.

Essentials

An injection of fresh talent
CPP Investments chief Mark Machin resigned at the end of last week after accusations of jumping Canada’s vaccination queue by visiting the United Arab Emirates. His replacement, John Graham, had an unconventional path to the top, as PEI explores here. From a background in research science, Graham climbed the CPPIB ranks to become its global head of credit investments, a position which saw him prioritise expansion in APAC credit markets. Graham is a fan of bringing different strategies together to create synergies – an approach we could see him deploy on a larger scale in his new role.

A tale of two pensions
On the subject of Canadian LPs, last year appears to have been a mixed bag for their PE portfolios. Caisse de dépôt et placement du Québec had a stellar 2020, generating a 20.7 percent net return for the asset class against a 9.9 percent benchmark, sister title Buyouts reports (registration or subscription required). The growth was attributed in part to covid-19-resilient investments in healthcare, services and technology. The story was less bright for the C$105 billion ($82.7 billion; €68.7 billion) Ontario Municipal Employees Retirement System, which reported an 8.4 percent net loss for PE, due in part to the pandemic’s impact on consumer assets and a slowdown in exits.

Dig deeper

LP meetings. It’s Monday, so here are some LP meetings to watch out for this week.

1 March

3 March

4 March

5 March


Today’s letter was prepared by Alex Lynn with Adam LeRod James and Carmela Mendoza.

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