Private Equity News & Analysis

Side Letter: PE’s branding bother; Investcorp’s Japan entry; Apex’s ESG platform

PE's inroads to the individual investor community may be hindered by a lack of brand recognition. Plus: Investcorp has set up shop in Japan; and the ESG benchmarking challenge just got a little easier. Here’s today's brief, for our valued subscribers only.

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Readers will no doubt have seen the sad news of Thomas H Lee Partners and Lee Equity Partners founder Thomas Lee’s passing last week. There’s more on this below.

Just happened

Under the radar
PE needs to up its profile if it is to access individual investors at scale. That is one takeaway from Bain & Co’s latest Global Private Equity report, out this morning. Though momentum is accelerating when it comes to PE’s democratisation – a theme we explored in our February issue – it’s clear that the industry needs to build on its brand recognition. When Bain asked 418 wealthy individuals to name firms that provide alternatives investments, none of the leading PE firms were mentioned. In fact, “I don’t know” was the most common response, followed by the likes of Fidelity and Vanguard.

“This suggests that even firms with established relationships among banks and advisers have hardly scratched the surface in terms of brand building,” Bain noted in the report. “The more alternative managers move down the wealth ladder, the more they will compete with some of the best-known brands in finance.” With individual investors expected to hold $47 trillion of assets by 2032, PE must do more to develop a recognisable (not to mention: favourable) public image if it wants a significant share of that pie.

For more takeaways from Bain’s report, check out our coverage here.

GLP’s PE push
Singaporean logistics giant GLP Capital Partners raked in roughly $2 billion for PE last year ahead of a major organisational restructuring, per a Monday statement. The capital was spread across Monoful Venture Partners I, which invests in growth-stage start-ups in Japan’s logistics and real estate ecosystem; and Hidden Hill PE RMB Fund II and Hidden Hill USD Foundation Fund, both of which invest in logistics and supply chain sectors in China and across Asia. The latter vehicle was formed by a GP-led transaction that involved moving six assets out of the GP’s Hidden Hill Fund I into a new, $465 million vehicle backed by NewQuest Capital Partners, our colleagues at Secondaries Investor reported in December (registration required).

GCP’s PE build-out began in 2018, Private Equity International reported at the time. The firm began life as a real assets specialist, and raised $10.3 billion across various funds in that arena last year. It launched 16 funds globally across both asset classes in 2022 alone, and had $125 billion of assets under management at year-end.

GCP is a relatively new entity. It was formed this month when logistics business GLP transferred its global fund management unit to the newly created GCP and combined this with GLP Capital Partners LP, a US-based investment adviser. GCP will act as the exclusive investment and asset manager of GLP and its balance sheet, while the latter will continue to provide the former with property management and other services.

Sticking with Asia…
Investcorp has this morning said it has launched in Tokyo. The office will allow the firm to provide global alternative investment options in Japan and sets the ground for its direct private equity and real estate investing, per a statement. The firm has appointed Professor Heizo Takenaka, Japan’s Minister of Economic/Fiscal Policy in 2001 and Minister for Internal Affairs and Communications from 2005 to 2006, as chairman of Investcorp Japan. The office is the firm’s 14th globally and fifth in Asia.

“In an era of high inflation and volatile currency fluctuations, coupled with ageing demographics, Japan needs to promote foreign investment by sophisticated investors to improve return on assets,” Takenaka said in the statement. “Investcorp’s rich experience in global alternative investments would contribute to our wealth management industry at its inflexion point, which calls for a shift from savings to investments.”

Japan has become one of the top-priority destinations for global PE firms expanding in Asia due to its compelling carve-out opportunities and massive pools of comparatively untapped LP capital. As the PE industry there is still relatively nascent, there is a shortage of experienced dealmakers and operations professionals with the requisite Japanese language and cultural understanding, as PEI explored last year.

The Apex of ESG
The push towards ESG benchmarking is gathering pace. Fund services firm Apex Group is the latest to enter the fray, launching an ESG data-as-a-service platform targeting private markets companies, our colleagues at New Private Markets report (registration required). The platform will provide data points on carbon footprints, DE&I, cybersecurity breaches and climate-related risks, and will eventually provide analysis on year-on-year trends. It was created after gathering data from more than 400 GPs and 1,500 portfolio companies since 2019 – for this, Apex worked with around 80 GPs directly and then contacted LPs to gather information on the remainder.

“We are aggregating [client data], but then we are providing them with insight about what private companies are actually doing, and therefore helping individual companies and their investors identify areas of underperformance to improve and overperformance to shout about,” global head of ESG product Joshua Brunert at Apex told NPM. Brunert, did, however, note that some clients have expressed reservations about sharing their data. “We have had a few who were not so keen, and that’s fine. They then sit on a different track, so that their data isn’t shared.”

They did the math

Emerging markets slowdown
Private capital deal values in emerging markets slipped 22 percent to $207.9 billion last year, per the Global Private Capital Association’s latest industry data report. That figure is still the second-highest since 2018. The modest decline was concentrated in late-stage venture and growth PE rounds with “public markets volatility, inflation and energy crises damping the optimism around tech-enabled consumer platforms, which fuelled the run-up in 2021”, the report noted. Central and Eastern Europe had the largest decline at 38 percent, followed by China at 35 percent. Meanwhile, deal activity accelerated last year for private credit and infrastructure, recording increases of 89 percent and 36 percent respectively.

Essentials

In memoriam
Lee Equity Partners and THL shared sad news on Friday following the passing of their shared founder, Thomas Lee. Here is a letter to limited partners from Lee Equity:

It is with deep sadness that we announce the passing of our Founder and Chairman, Thomas H. Lee. He was a great partner and wonderful friend whose vision will continue to influence us for many years to come.

Tom was a pioneering investor who helped create the private equity and leveraged buyout industry as we know it. Before founding Lee Equity Partners in 2006, Tom built Thomas H. Lee Partners (THL), which raised the largest private equity fund in the world in 2001 under Tom’s leadership. Since 1974, Tom has been responsible for investing over $15 billion of capital in hundreds of transactions. Tom’s long and distinguished career was highlighted by the many companies, entrepreneurs and investors who were his partners and friends over almost half a century of investing.

Tom, a prominent philanthropist, was committed to numerous charitable and educational organizations including his alma mater, Harvard College. Tom was passionate about providing access to care and supported this goal through his commitment to NYU Langone Medical Center. Tom loved New York City and was devoted to many of its most important arts and civic organizations. He served as a trustee of Lincoln Center for the Performing Arts, The Museum of Modern Art and the Whitney Museum of American Art, among others.

Tom’s determination, commitment and strategic vision will continue to inspire all of us at Lee Equity Partners. He was a leader, a friend, a partner, and our mentor. We know he will be proud as the firm continues on, with strength. We will work every day to meet the high standards he has set for us and the entire industry. On behalf of our employees, management teams and investment partners, we mourn his loss and extend our deepest sympathies to his family.

We ask that you please respect the family’s privacy during this very difficult time. If you have any questions, please don’t hesitate to reach out to any of the Partners at Lee Equity.

On behalf of PEI Group, we would like to express our sincere condolences to Thomas’s family.

Dig deeper

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

27 February

28 February

01 March

02 March

03 March

Today’s letter was prepared by Alex Lynn with Carmela Mendoza and Helen de Beer.