Side Letter: Silver Lake’s $16bn litmus test, Joncarlo Mark’s take, covid-19 fight back continues

Big funds are getting raised amid the crisis ... they are even being launched. Plus: a former CalPERS PE pro gives his take on the market, how some firms are fighting back against the pandemic, and the co-investment crisis wash-up. Here’s today's brief, for our valued subscribers only.

Just happened

Silver Lake’s $16bn litmus test

Silver Lake is prepping a $16 billion fundraise, according to a Reuters report. This time last year that number would have seemed totally normal – fellow tech heavyweight Vista Equity Partners closed a $16 billion fund in September – but this is the first fresh mega-fundraise we are hearing about that will launch in a post covid-19 world (it’s worth noting that CVC Capital Partners is expecting to close a giant vehicle at some point in H1). It will be an indicator of how blue chip institutional investors are placed to carry on investing amid this downturn. Silver Lake declined to comment.

Mark on the market 

Joncarlo Mark

Joncarlo Mark, pictured, is a former senior portfolio manager at CalPERS who left the pension in 2011 to set up investment advisor Upwelling Capital Group. Here’s his take on how the private equity market will fare amid the covid-19 pandemic:

  • Most GPs are in “fire control mode”, devising plans to minimise loss and perform triage. However, some with companies that are less hard hit are spotting opportunities for add-on acquisitions.
  • Mark has been hearing from providers of preferred equity and fund-level lending that they’re open for business – and the demand’s likely to be there.
  • Seasoned LPs have built flexibility into their investment policy targets and so are able to keep committing capital to PE. They are likely to home in on special situations opportunities and focus commitments on their most trusted managers. However, LPs that have entered the asset class since 2008 could well be unprepared for what they’re now facing.
  • We’re going to see some LPs try to walk away from commitments that are less than 25 percent funded in an attempt to relieve their 75 percent future funding obligation.
  • Co-investments could suffer if LPs aren’t set up to provide extra capital to those that are struggling.

Read the interview in full.

Insight, CVC toast new funds

Insight Partners has closed its latest flagship fund on an eye-popping $9.5 billion, significantly overshooting its $7.25 billion target. Founder and managing director Jeff Horing said the firm is “thankful and humbled” by the support of its investors in the current market climate.

CVC Capital Partners closed its fifth Asia fund on its $4.5 billion hard-cap. More details here.

PE vs covid-19

We’ve just posted a document from ASCRI, the Spanish private equity association, listing some of the initiatives its members and portfolio companies have undertaken to combat the effects of the pandemic.

Meanwhile, Advent International’s senior team members have created a $25 million relief fund that will be channeled to “healthcare professionals, first responders, front-line workers, employees of our portfolio companies and others in the community most impacted by the outbreak,” said James Brocklebank and David Mussafer, co-chairs of the firm’s executive committee, in a letter to portfolio company execs and operating partners. We’ve posted this letter in full as it also details anti-covid initiatives by Advent portfolio companies.

He said it

“What I have heard and discussed directly with LPs is that they are following through with some of their commitments that were in the works. They haven’t just put everything on hold”

 

Upwelling Capital Group’s Joncarlo Mark notes that seasoned LPs are not backing away from their PE programmes.

Essentials

Co-investment wash-up. The current downturn will expose LPs that have been taking a “rifle shot” rather than a diversified, programmatic approach to co-investing, reports Chris Witkowsky. LPs that opted for an opportunistic, “concentrated, large-cheque” approach are going to be exposed to chance, one pension offical says: “Through no fault of their companies, they will be either lucky or unlucky.”

ESG in the time of covid-19. Partners Group expects revenue shortfalls in many of its portfolio assets and will postpone environmental, social and governance initiatives planned for 2020 for companies that are hardest hit by covid-19, said partner Fredrik Henzler on the firm’s corporate sustainability update call on Thursday. For others, it will be business as usual on tracking ESG KPIs.

New post for Matsuo. HarbourVest has hired Tadasu Matsuo, former head of alternatives at Japan Post Insurance, according to a report on AVCJ. We’ll bring you more on that soon.

Dig deeper

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

We did the math

Fly less, zoom more? Respondents to our covid-19 survey are considering whether in the long term they need to fly to AGMs.


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Today’s letter was prepared by Toby MitchenallIsobel MarkhamAdam LeRod JamesCarmela Mendoza and Alex Lynn


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