Calling all database users!
Private Equity International subscribers might have noticed something different about our database this week. That’s because we’ve given it a shiny new upgrade to make the database easier to use and more informative than ever before. Besides a more user-friendly and speedier interface, new features include law firm profiles and pages designed specifically for service providers such as placement agents and investment consultants. If you haven’t already checked it out, give the new-look database a try here.
Getting specific on sanctions
US managers are increasingly looking to provisions relating to sanctioned investors in their fund documents, our colleagues at Private Funds CFO report this week (find it on PEI here). Fund documents are usually silent on sanctions issues, except for asking for representations from investors that they have not been sanctioned, and firms are now considering including explicit actions they may take against sanctioned investors, as required by the US Office of Foreign Assets Control and anti-money laundering laws. “We’re considering whether to include language in our fund docs to let investors know that we reserve the right to remove investors or freeze assets of sanctioned individuals, as required by regulatory authorities,” one chief compliance officer of a large asset management firm noted.
This development is perhaps unsurprising given the actions taken by foreign governments against certain Russian individuals and entities in the wake of its invasion of Ukraine. These sanctions have caused headaches for some PE managers, including Pamplona Capital Management, which in March said it had received permission to liquidate three of its funds backed by LetterOne, an investment firm linked to sanctioned Russian oligarch Mikhail Fridman.
Adding more specific sanctions language to fund documents can come with risks. Wording that is overly prescriptive can lead to managers’ handcuffing themselves when it comes time to act. “You don’t want your fund documents to be too specific because you don’t want to limit yourself in how you can deal with certain situations,” the CCO said, noting that every situation is unique. “So, you will want to be able to act accordingly, which is why our docs don’t say much beyond that we will take necessary actions under applicable laws. But we’re considering whether and how we can be a little more specific.”
Spreading the wealth
PE’s burgeoning love affair with private wealth continues apace. US investment firm Lovell Minnick Partners last week agreed to purchase a majority stake in London & Capital, a UK-based wealth managing $5.2 billion in client assets. Our colleagues at PE Hub have details here (registration required). London & Capital’s management team will retain a significant minority stake in the business.
The transaction marks a further blurring of the lines between private wealth and the wider PE industry. As PEI noted in our February Deep Dive, a deepening pot of wealthy individuals is an opportunity that many PE managers are no longer willing or able to ignore – especially as fundraising pressures on institutional investors grow. The industry’s push into this space has sparked concern in some quarters, with the UK’s Financial Conduct Authority, for example, reportedly examining PE’s involvement in the wealth and asset management industry to better understand potential risks.
Reaching their Potentia-l
Potentia Partners, the Australian buyout and growth equity tech firm, has collected A$635 million ($440 million; €422 million) for its sophomore blindpool fund, according to a statement from placement firm Asante Capital. Fund II exceeded its A$500 million target in an almost wholly virtual fundraising process that involved commitments from insurers, family offices, Australian superfunds and others. The firm launched in 2014 by managing director Andrew Gray, who previously spent five years at tech giant Francisco Partners and was later a managing director at Australia’s Archer Capital.
This latest vehicle will have a greater focus on New Zealand than its predecessor – which closed on A$465 million in 2019, according to PEI data – and benefit from an as-yet un-appointed executive in Singapore to hunt for Asia bolt-ons. The key to Potentia’s successful raise during a period in which Australia was isolated from much of the world may lie in performance: the firm exited payroll software company Ascender at a 16.4x capital multiple in February 2021 and compliance software business CompliSpace at 4.7x late last year.
Today’s letter was prepared by Alex Lynn with Helen de Beer.