Side Letter: PE’s $535bn and counting; KIC’s alts portfolio; STIC’s backdoor listing

Private Equity International's latest fundraising stats show an asset class on track for a record-breaking year. Plus: A look inside KIC's alternatives portfolio and Asia is set to become home to PE's next listed firm. Here's today's brief, for our valued subscribers only.

They said it

“The fact that more capital is now being raised in private markets means that a burgeoning portion of the US economy itself is going dark”

Commissioner Allison Herren Lee of the US Securities and Exchange Commission said in last week’s annual SEC Speaks that the regulator should require more disclosure from private companies as their growth outpaces that of their public counterparts.

Just happened

Records are made to be broken
Our third-quarter fundraising figures are in and 2021 could well become a record-breaking year for private equity. The first nine months saw a total of 965 PE funds raise $535 billion, about 40 percent more than the equivalent period last year and the highest year-to-end-of-September total since 2008, according to preliminary figures from PEI’s Q3 Fundraising Report. And with the 10 largest funds in market alone targeting $147 billion between them, it seems a safe bet that this year’s total has the potential to match or exceed the $704 billion raised in 2019. You’ll be able to dig deeper into the numbers in our coverage later today.

STIC’s backdoor listing
PE’s small cadre of listed firms is about to gain a new member. Korea’s STIC Investments plans to go public in December via a backdoor merger with its parent company, electrical manufacturer Digital Power Communications, per a Korean-language company filing. After the merger, DPC will be renamed STIC Investments and the manufacturing side of the business will be sold, Korea Herald reports. STIC, which invests on a pan-Asian basis, oversees about $4.5 billion of assets under management across buyouts and growth equity. It joins a number of listed firms in Korea, including Mirae Asset Management and Company K Partners.

They did the math

Inside KIC’s portfolio
Speaking of Korea, the country’s sovereign wealth fund, Korea Investment Corporation, has released new details about the composition of its portfolio. The $183 billion institution’s latest annual report, published in Korean last week, reveals a 16.4 percent exposure to alternatives (which, by its definition, includes hedge funds and cash equivalents). PE is the largest alts asset exposure, accounting for 7.3 percent of the overall portfolio, followed by real estate and infrastructure at 6 percent. KIC said in July that it aims to increase its alts allocation to 25 percent by 2027, from about 17 percent this year. KIC is the latest Korean LP giant to shed light on its holdings – the National Pension Service of Korea did so in August. More details here.

Essentials

LACERA’s PE plans
The Los Angeles County Employees’ Retirement Association has bumped up its target PE exposure from 10 percent to 17 percent, according to documents from last week’s board meeting. The $72 billion scheme’s PE exposure sat at 13.7 percent as of 31 July – a figure it plans to expand through increased pacing, co-investments and secondaries. Here’s what you need to know:

  • The board has opted to deploy about $2.15 billion this year and $2.45 billion next year, with 20 percent leeway above or below those figures. This compares with $1.6 billion in 2020.
  • The new five-year commitment model culminates in a $3.5 billion yearly commitment and a 16.7 percent allocation to PE.
  • LACERA has increased its bitesize for co-investments to $130 million, from $70 million.
  • The pension can now deploy up to 30 percent of its yearly allocation via co-investments and secondaries. Non-US investments can account for 20-45 percent of its yearly allocation.

Petershill’s pricing
Goldman Sachs‘ newly listed GP stakes unit, Petershill Partners, doesn’t appear to have made the strongest start to life as a publicly traded entity. Petershill’s share price was down about 9.8 percent as of this morning from its September IPO. Numis analyst David McCann tells The Wall Street Journal this could be due in part to a lack of disclosure over how much Petershill owns of each portfolio GP and the corresponding fees, and to speculative investors that may have deserted the stock after failing to get a first-day bounce. You can read more about Petershill’s IPO here.


Today’s letter was prepared by Alex Lynn with Carmela Mendoza and Michael Baruch