Side Letter: Rubenstein on EMs, CPPIB’s VC push, ADIA’s big deal

Good news everyone! Emerging market is no more (so we are told). Here’s today's brief, for our valued subscribers only.

Just happened

IFC conference day two: Rubenstein, Ts&Cs and GP-leds

  • Rubenstein: EM bull. Carlyle co-founder David Rubenstein (pictured) is putting his money on emerging markets through his family office Declaration Capital. Carlyle is too, gearing up to raise its second Africa fund; more details in Essentials below. Most EM headwinds, such as commodity price declines, concerns about corruption and finding good deals, are over, Rubenstein said.
  • Ts&Cs. Some EM funds are getting creative with terms. North America and Africa investor Singularity Investments, for instance, reserves 60 percent of capital to support more portfolio company follow-ons, and calculates carried interest on multiples rather than IRRs, said principal investment officer Lexi Novitske.
  • Emerging markets secondaries. A GP-led secondaries market is developing in emerging markets and a few landmark deals have affirmed the strategy should not be considered negative, Morgan Stanley AIP executive director Pamela Fung said at the conference in Washington, DC on Wednesday. GP-led secondaries are a valuable strategy in markets where volatility can affect investing in and exiting deals during regular fund life, she added. Notable examples include Peruvian PE house Enfoca’s near $1 billion restructuring and Chinese firm Capital Today’s almost half-billion dollar single-asset restructuring, both last year.

CPPIB’s directs fly

Canada Pension Plan Investment Board says that by bringing its fund investing and direct investing processes together it has increased the number of “passive direct” investing opportunities. The result? More than double the direct activity in the last year than the previous one, according to its results today.

The fund will also build a new VC fund investing programme: “The group will continue to proactively develop GP relationships to gain better insight into upcoming fundraising activities.”

Big deal

In other direct investing news, ADIA is teaming up with EQTPSP Investments and unnamed others to buy the skincare subsidiary of Nestle for SFr10.2 billion ($10.1 billion; €9 billion). The unit has revenues of SFr2.8 billion. ADIA is currently on a mission to crank up its direct investing activity and this deal represents its largest to date. You can read more on ADIA’s directs ambitions here.


Study: PE good. Put another white paper on the “making the case for PE” pile. Returns are better than prior research would suggest, according to Have Private Equity Returns Really Declined? from Greg Brown of the Kenan Institute of Private Enterprise and Steve Kaplan of the University of Chicago. US buyouts have historically outperformed the S&P 500 by a fairly wide margin, generating 4.8 percent of direct alpha and an average public market equivalent of 1.22x against the S&P 500 as of Q3 2018. For less flattering findings, check out this AQR research from January.

Making it rain down in Africa. It’s going to take a lot to drag The Carlyle Group away from Africa: the firm is reportedly raising capital for its second fund for the continent, per sister title Buyouts. Since it launched its Sub-Saharan African Fund in 2013, it has undergone management change, seen its Africa chief leave to set up his own shop, experienced a period of slow growth and currency volatility, and extended its investment remit to include North Africa. Still, it’s almost fully deployed SSAF across 13 deals and exited one, per its website. The target for the new fund is unknown.

Carlyle’s Bagijn on the future of commitments. There will always be a place for commingled co-investment and secondaries funds at Carlyle, says Ruulke Bagijn, a former PEI Game changer of the year who was appointed head of the firm’s AlpInvest and Metropolitan units last week. However, SMAs still represent a massive opportunity for the firm, she tells PEI’s Adam Le: “SMAs are the way that institutional investors like to do business[…] this is absolutely a core market for us to approach and where we can also make big wins.”

Dig deeper

Wolverines’ PE wish-list. The $12.24 billion University of Michigan endowment has a 70.6 percent allocation to alternative assets, of which 28 percent is allocated to private equity. It has just committed to two Bain Capital funds and InvestIndustrial’s latest flagship. For information on more than 6,700 institutions, check out the PEI database.

He said it

“I got family office envy. People kept saying, ‘How come you don’t have a family office? Everyone has a family office’. I felt naked walking into parties and not having a family office. So I said: ‘I’ll get a family office’. I recruited people and now I am very happy, because I can say ‘I have a family office’.”

Carlyle co-founder David Rubenstein tells delegates at the IFC/EMPEA conference in Washington, DC about setting up his family office Declaration Capital.

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Today’s letter was prepared by Toby MitchenallAdam LeCarmela MendozaAlex Lynn and Preeti Singh.

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