Japan: PE’s allocation nation
For all the high-profile cuts to private equity allocations in the US over the past 12 months, more than half of institutional investors globally are in fact hungry for more of the asset class. That’s according to the 2023 Global Institutional Investor Survey from Nuveen, which found that 72 percent plan to increase their private markets allocations over the next five years. Meanwhile, 52 percent will raise their allocations to PE, specifically, over the next two years. PE is the most popular asset for growth after infrastructure, to which 58 percent will raise their allocations; private credit is third at 47 percent. The report surveyed 800 institutions globally, of which 58 percent had more than $10 billion of AUM.
For Japan, the picture gets even rosier. Some 69 percent of Japanese institutions plan to raise their allocations to PE over the next two years, more than any other alternative asset class, with only 2 percent planning to decrease their allocations. What’s more, appetites are increasing: last year only 58 percent said they’d up their exposure. New entrants like the Japan Science and Technology Agency also represent a potentially lucrative partner to GPs.
This will be welcome for the myriad GPs that have set up shop in Japan over the past decade in pursuit of its vast institutional capital reserves. As Side Letter noted earlier this month, fundraising in the market has been more challenging over the past year as domestic investors grapple with a combined numerator and denominator effect – a dynamic we’ll examine more closely in next month’s Japan Special Report.
Omnes sees green
It’s rare to see a PE firm throw in the towel when it comes to leveraged buyouts. Paris-headquartered Omnes Capital has decided to do just this: the firm, which spun out of Crédit Agricole Private Equity in 2012, said yesterday it had sold its buyout activities as part of its move to focus more on sustainable investment and energy transition strategies.
Details of the arrangement, which have been ongoing since early 2022, have been reported in the French business press over the past year. A spokesperson for the firm confirmed to Side Letter that French-listed IDI, which is taking a minority stake in Omnes of more than 40 percent, has acquired Omnes’ buyout and private debt businesses. The spokesperson declined to give further details, but according to a report in French-language Les Echoes, Omnes’ growth capital and buyout activities will be housed in a unit called IdiCo with roughly €1 billion in AUM.
Omnes’ business lines are now arranged across four strategies: VC, sustainable cities, renewable energy and co-investments. The firm also confirmed yesterday that chief executive Fabien Prévost is stepping aside after almost two decades in the role. Prévost becomes chairman and CIO, with former infrastructure managing partner Serge Savasta taking over as CEO. Savasta will oversee a firm that wants to more than double its AUM to €10 billion “in the medium term”, mainly by expanding its activities internationally.
The ESG see-saw
A California bill that could impose some of the most detailed ESG reporting requirements in the US so far has overcome its first hurdle towards being passed, our colleagues at Regulatory Compliance Watch report (registration required). If passed, the Climate Corporate Data Accountability Act – which recently cleared the California Senate’s Environmental Quality Committee – would require all companies that do business in California and have at least $1 billion in total revenues to track and report their Scope 1, 2 and 3 carbon emissions. It mirrors similar results that are already in place in other markets, such as the EU’s corporate sustainability reporting directive.
“This bill is just basic data transparency. That’s all it is,” bill sponsor Senator Scott Wiener, tells RCW. “Companies can still do business however they want, but they’ll need to disclose their carbon footprint. It’s a very reasonable thing to have this information for investors.”
Backers are confident the bill will pass. Still, hurdles abound. Our colleagues at Responsible Investor reported (registration required) yesterday, for example, that anti-ESG proposals are up 66 percent this year. Increasingly polarised views on the issue between states could spark headaches for fund managers and investors alike.
Greenwashing red flags
Investment consultant bfinance has shared a list of potential red flags for LPs considering the PE’s burgeoning impact space, our colleagues at New Private Markets report (registration required). Here are a few key things to watch for:
- Slow/limited development of ESG/impact resources; staff may be inexperienced (rapid move from analyst to director level due to high demand for talent).
- ESG/impact individuals spread thinly across strategies/asset classes, with low time commitment to a specific strategy.
- Annual sustainability reports lack transparency and/or tangible evidence of outcomes achieved by the firm to support commitments.
- Lack of discussion or willingness to consider (over time) developing KPIs that are linked to impact particularly as impact outcomes are a measurable objective of the strategy.
Today’s letter was prepared by Alex Lynn with Adam Le, Helen de Beer and Madeleine Farman.