Side Letter: PE’s increasing Axxes-ibility; EU syndication shutdown; SEC’s comment glitch

Why a Miami-based private markets firm could become proof of concept for a wave of new evergreen fund managers. Plus: European sponsors are re-evaluating their funding options; and why the SEC is reopening the comment period on some of its private funds proposals. Here's today's brief, for our valued subscribers only.

Just happened

Accredited investors: Benefiting from a growing product set (Source: Getty)

Expanding Axxes
While it’s increasingly common to see established private equity firms launching products for individual investors, or at least finding ways to incorporate private wealth into their funds, it’s more rare to see managers dedicating themselves solely to this capital stream. Enter: Axxes Capital, a new Miami-based firm, which plans to launch three to five evergreen funds for accredited investors (via their financial advisers) before the end of Q1 2023, per a statement. The vehicles, which will span a range of private markets strategies including PE, distressed debt, VC and climate, will have $25,000 minimum buy-ins and provide limited liquidity on a quarterly basis. Investors will pay only one set of investment fees, which Axxes will share with its underlying managers.

Axxes is founded and led by Joseph DaGrosa, who Private Equity International readers might recognise as the founder of Kapital Football Group, a sports investment business that in 2020 was linked to the acquisition of a Premier League football club with backing from Ares Management. Axxes is expected to seek up to $2.5 billion, PitchBook reported earlier this year.

The fact that emerging firms like Axxes see enough potential in the accredited investor market to prioritise these over more traditional sources of LP capital is perhaps a sign of the times. A number of big-name players – Hamilton LanePantheon and Partners Group among them – have already developed evergreen structures designed to capitalise on rising demand from individual investors and their advisers. If Axxes succeeds in demonstrating that smaller, more boutique firms are also capable of raising billions from this channel, the investable universe for this comparatively untapped pool of LP capital may soon become a lot larger.

Syndication shutdown
Times are a-changing in Europe. The macroeconomic shocks of the past six months – the energy crisis, the inflation spike, rising interest rates and continued supply chain disruption – are forcing PE sponsors to re-evaluate their funding options. “The syndicated loan market and the high-yield market are both effectively shut in Europe right now,” says Luke McDougall, co-chair of the global finance practice at law firm Paul Hastings. “There are some limited circumstances in which someone would go to market, but generally speaking, as of early September, it is not a feasible option for leveraged buyouts.”

And yet it’s not all doom and gloom – far from it. The shifting landscape has thrown up a set of opportunities for European debt investors that make market participants quietly confident that growth will continue. You can read all about the region’s shifting trends – including country-focused analyses of the key markets – in the latest Europe Report 2022 from our colleagues at Private Debt Investor (registration required).

Essentials

A dam for the data deluge
GPs are hoping new ESG Reporting Guidelines from trade body Invest Europe will soothe some of the headaches caused by a proliferation of LP data requests, our colleagues at New Private Markets report (registration required). GPs have been inundated with surveys that are “all asking the same thing in slightly different ways”, Zoë VanderWolk, investor relations and sustainability manager at ETF Partners, told delegates at the BVCA Summit 2022 in London last week.

Invest Europe’s framework promises a more streamlined collection and assessment of ESG data. Martin Bresson, public affairs director at the organisation, told New Private Markets: “The guidelines contain a detailed mapping of existing voluntary international standards and frameworks, and of the pan-European regulatory framework, including practical guidance on how to comply with the EU Sustainable Finance Disclosure Regulation/taxonomy regulation and how to deal with the outstanding uncertainties.”

Invest Europe’s new framework is the most comprehensive created to date, according to TowerBrook’s chief sustainability officer, Abrielle Rosenthal. “What is most helpful is that it has considered many of the other frameworks in the market and has attempted to pull them together and build them into its master framework,” she said. “For GPs, that convergence is where we see these initiatives being the most useful.”

Commission comments
If you were worried that some of your thoughts on the US Securities and Exchange Commission’s ambitious reform agenda were falling on deaf ears, you may have been on to something. The regulator is reopening comments on 11 big-ticket rulemaking proposals because a “technological error” swallowed public letters, our colleagues at Regulatory Compliance Watch report (registration required).

The reopened dockets include the commission’s proposed ESG disclosure rules for investment advisers, strict new reporting requirements for cybersecurity, new private fund audit rules, SPAC reforms, and proposed overhauls of money market funds, institutional fund managers’ shorting strategies, the names rule and security-based swaps. The SEC has issued a new proposed order; if adopted as written, commenters will have 14 extra days to comment on the proposed rules.


Today’s letter was prepared by Alex Lynn with Tobias Waters