Side Letter: Saudi PIF’s GP disclosure; Goldman’s insurance survey; Apollo HR head interview

A list shows which managers Saudi Arabia's $607 billion Public Investment Fund has committed LP capital to. Plus: the European Commission's "excessive" and burdensome regulation and Goldman finds private debt is increasingly popular. Here’s today's brief, for our valued subscribers only.

Just happened

Shifting sands: Riyadh’s PE disclosure (Source: Getty)

Who are Saudi PIF’s GPs?
Saudi Arabia’s Public Investment Fund isn’t exactly known for its transparency when it comes to private equity fund commitment disclosures. Surprising, then, that the sovereign wealth fund has disclosed a list of venture capital, growth and buyout managers whose funds it has committed capital to. You can find a list of the 57 managers here, which includes some of the biggest brand name firms in private equity, on the website of Sanabil Investments, its investment arm. The website also notes that it does consult with advisers when it comes to selecting prospective fund managers, though it does not engage placement agents.

The disclosure is interesting for three reasons:

  • PIF is the world’s sixth-largest sovereign fund with around $607 billion in assets, according to data from the Sovereign Wealth Fund Institute, so a giant when it comes to potential LP capital.
  • Data on which firms PIF has fund relationships with is typically difficult to come by. Until now, the number of managers it has relationships with and the breadth of those relationships (the website discloses some notable Chinese GPs, for example) has been largely kept under wraps.
  • The ethics of accepting LP capital from the Kingdom has come under the microscope in recent years, notably with the killing of dissident journalist Jamal Khashoggi in 2018 in which crown prince, Mohammed bin Salman, was alleged to have been involved. At the time of Khashoggi’s disappearance, when Blackstone was raising its $40 billion Infrastructure Partners fund with a $20 billion anchor commitment from PIF, president and chief operating officer Jonathan Gray said the firm had been “concerned” about what it had been reading the last couple weeks, adding: “That said, we take a long-term approach both to our relationships and to building businesses.”

FAO: the European Commission
A consortium of 13 industry bodies has penned a joint statement to the European Commission in response to its Foreign Subsidies Regulation, which came into force in January, and the subsequent draft implementing regulation, whose consultation period ended last month. The regulation would generate “unintended consequences and create a disproportionate burden for EU and non-EU businesses with a global presence”, the group writes.

The FSR is designed to combat competition-related issues caused by foreign subsidies in the EU’s internal market. Side Letter attended a call on Tuesday led by Invest Europe, which outlined some a few key issues. In a word map generated from responses during the consultation period, three of the most prominent phrases were “excessive”, “burden” and “very concerned”.

Kaarli Eichhorn, vice-chairman of American Chamber of Commerce to the EU, noted on the call that the consortium does not disagree with the FSR as a concept, though the regulation raises “very serious questions”. “It’s an honest assessment by businesses that this will not only be very difficult, but potentially even impossible… The data that is being requested here in the context of the FSR… simply does not exist in corporate organisations today.”

The consortium presented four main demands of the European Commission: to narrow the scope of reporting obligation; exempt the disclosure of classified information; allow all relevant parties to supply information directly to the commission; and provide clarity on some key concepts, which many respondents note are too vague. Should these requirements not be met, the letter argues, the FSR could be deeply damaging to the European investment landscape.

“Does [the regulation] mean that investors would look at other regions of the world for investment? One could not exclude that if the cost of making an acquisition in Europe becomes increasingly burdensome and there are a plethora of acquisition target cells within the world, maybe that would be a calculation to be done,” Eichhorn said.


Private debt on the up
Insurance companies are set to inject more capital into the private debt market in the coming year. Just over 40 percent of 343 insurance company CIOs and CFOs plan to increase their allocations to private corporate debt over the next 12 months, according to a report by Goldman Sachs Asset Management. A further 30 percent plan to maintain their allocation. A majority 51 percent of respondents said they will look to increase their allocations to private assets in the next year with 29 percent indicating they plan to allocate more to private equity in particular. Despite market uncertainty, GSAM believes there are particular opportunities in credit “where increasingly attractive yields in fixed income have lured back insurance investors”, Michael Siegel, global head of insurance asset management and liquidity solutions, said in a statement. The firm also expects insurers to continue building their positions in private asset classes, including private equity, “as they seek to diversify portfolios and take advantage of expanding illiquidity premiums”.

Apollo’s head of HR on what works (and what doesn’t) in employee retention
How does a PE behemoth like Apollo Global Management keep up with intense competition over talent and map out the future of its organisation? That – and many other factors including the surge in awareness of diversity, equity and inclusion issues – were discussed by Matt Breitfelder, global head of Apollo’s human resources, in an interview with affiliate title Private Funds CFO. It all comes down, Breitfelder says, to co-creation. “If you want the culture to stay vibrant and stay successful and keep evolving over many years, you’ve got to co-create it with your employees. They are pretty clear about what they see as the drivers of great performance and a great place to work.”

Data, which includes employee pulse surveys and 360 feedback surveys, are also essential to identify issues and problems in the work culture and assess staff sentiment, Breitfelder notes. Here’s a stat: half of Apollo’s employees joined in the past two years – around the same time the firm’s co-founder Josh Harris reportedly set out to transform the company’s public image. You can read more about Apollo’s ‘Platinum Rule’, Breitfelder’s top human capital reads, and more in the full interview here.

Today’s letter was prepared by Adam LeCarmela Mendoza, Helen de Beer and Madeleine Farman.