Side Letter: Silver Lake’s $19bn; Apollo’s ‘maniacal focus’; VC’s female fundraisers

Silver Lake is on track to surpass its previous flagship fund size. Plus: Apollo is leaning into APAC and Middle Eastern LP bases; and advice for women looking to raise funds. Here’s today's brief, for our valued subscribers only.

Just happened

Silver Lake’s pool
Silver Lake’s latest flagship vehicle looks set to overtake its predecessor – no mean feat in this challenging fundraising environment. The tech giant has so far amassed $19.2 billion for Fund VII, our colleagues Buyouts report (registration required). The vehicle does not have a formal target and is expected to hold its final close before year end, sources told Buyouts. Fund VI closed on $20 billion in 2020, ahead of an $18 billion target.

Silver Lake could prove the exception to the rule, with a number of large alternatives shops now conceding their latest vehicles could close below target. Apollo Global Management expects to wrap up fundraising for its flagship vehicle Fund X over the summer with commitments in the “low-$20 billion range”, co-president Scott Kleinman said on the firm’s first-quarter earnings call yesterday. The firm has been targeting $25 billion and raised $24.7 billion for Fund IX in 2017.

Last week, The Carlyle Group’s chief financial officer, Curt Buser, said the firm’s upcoming fundraising hauls could look more subdued. “While we believe that we will attract a significant amount of capital for our next vintage of buyout funds, we no longer expect these funds in the aggregate to be the same size as their predecessors,” Buser said on the firm’s first-quarter earnings call. “We now expect to see a decline in buyout fund sizes across most geographies.”

There are some recent examples of mega-funds surpassing their targets. Genstar Capital held a $12.6 billion one-and-done on its Genstar Capital Partners XI fund, beating its $11 billion target (its predecessor closed in 2021 with approximately $10.2 billion of total committed capital). Meanwhile, Silver Lake’s tech-investment peer Thoma Bravo closed Thoma Bravo Fund XV on $24.3 billion in December after 16 months in market, topping its $16.5 billion target. The vehicle marked a significant increase on its 2020-vintage predecessor, which closed on $17.8 billion.

Clearly it’s not all doom and gloom in the fundraising environment. Still, as senior reporter Madeleine Farman explores in an upcoming report today, the threshold for what constitutes a successful fundraise may well be shifting.

Speaking of Apollo…
Apollo’s “maniacal focus on low purchase price for the quality of business we’re buying” is what sets its PE unit apart from the rest. That’s according to chief executive Marc Rowan, speaking on the firm’s first-quarter 2023 earnings call on Tuesday. “Purchase price matters is grounded in facts; it’s grounded in cash flow; it’s grounded in prospects,” he added. This investment thesis across its equity and credit offerings appears to have played into market dislocation and volatility, with total fundraising this year expected to exceed last year’s $130 billion.

Apollo recorded $57 billion of inflows in the first quarter, compared with $31 billion in Q1 2022. That figure was driven by the $37 billion related to the February acquisition of Credit Suisse’s securitised products group, as well as through capital collected for credit-focused SMAs, its wealth products, retirement services via Athene and its 10th flagship PE fund.

Here are other fundraising highlights from the firm:

  • Investors based in the Middle East and Asia “turned up their focus” on Apollo’s offerings and stepped in, as investors in the US and Europe pulled back, co-president Scott Kleinman said.
  • The firm said it saw “no material increase in redemptions in global wealth offerings” among their individual investor clients.
  • Some 30 commingled and perpetual capital vehicles are expected to be in market this year; Q2 quarter inflows will be significant with “several sizeable mandates and fund closes in the near-term”, Kleinman noted.

Heard on the block
Side Letter spent yesterday at Day 1 of the the PERE Europe Forum 2023 in London, and while much of the discussion was around – you guessed it – private real estate, attendees were keen to share their thoughts on the biggest issues facing investors, regardless of asset class.

On the side lines of the event, a senior banker at a Europe-headquartered investment bank described the current global economic environment as “schizophrenic”. “People get up on stage [at conferences] and say everything’s going to be fine, and so you think, OK, I guess things aren’t that bad. And then three banks go under and you have to wonder, is this the start of something really bad?” the person said, referring to the collapses of Silicon Valley Bank, Credit Suisse and First Republic.

Most people don’t fully understand how far-reaching a financial shock will be, the person added. “Think about what happened in 2008. Institutions that weren’t even connected to Lehman [Brothers] were hit in a massive way.”


Female fundraisers

Yesterday, Side Letter noted that PE is showing improvement – albeit incremental – when it comes to the representation of woman in their firms. The number of women-owned VC and PE managers climbed 21 percent last year to 760, according to a report from Fairview Capital Partners. The report also shows that the number of women- and minority-owned firms has grown at a compound annual growth rate of 27 percent since 2014. Though a positive direction, these figures are still too low, Julie Castro Abrams, co-founder of early-stage GP How Women Invest, tells our colleagues at Venture Capital Journal (registration required).

Research cited in a 2020 Forbes article states that when US venture firms increased the proportion of female partners, they achieved 9.7 percent more profitable exits and a 1.5 percent increase in overall annual fund returns. The study also showed that female-led VCs are more likely to invest in female-founded companies. With this in mind, women who have successfully raised funds shared the following advice with VCJ for others who hope to follow in their footsteps:

  • Fairview co-founder JoAnn Price says having confidence and a solid belief system helps combat scepticism from others. “When you’re doing something new, something that has not been done before, something where people are going to be sceptical, somewhere within yourself you have to believe that you can get it done.”
  • Amboy Street Ventures founder Carli Sapir says mission-driven funds are more likely to attract high-net-worth female LPs, noting the importance of ensuring investors are aligned with your firm and the funds’ values. Her debut fund, which closed on $20 million in March, is laser focused on women’s health and sexual health – an emphasis that helped it resonate with potential investors.
  • How Women Invest’s Abrams says traditional pitching doesn’t yield enough benefit compared to cost. Relationship building, instead, is more effective, as women fundraisers “speak in language that they (women LPs) understand”.
  • If institutional investors aren’t available and you’re relying on individuals to fund your firm, you may want to consider taking smaller cheques, she adds. She lets her LPs invest as little as $6,250 per year over four years, opening up access for a minimum check size of $25,000, much lower than the industry standard.

Dig deeper

Institution: Employees’ Retirement Fund of the City of Dallas
Headquarters: Dallas, US
AUM: $3.6 billion
Allocation to private equity: 10.5%

The Employees’ Retirement Fund of the City of Dallas plans to increase its target allocation to private equity, according to board documents from its 9 May board meeting.

The US public pension targets an allocation to private equity of 7.5 percent. Under the new asset allocation plan this would increase to 10 percent, with an acceptable range of 5-15 percent.

As of 31 March, Dallas ERF had a roughly 10 percent exposure to private equity.

For more information on Dallas ERF, as well as more than 5,900 other institutions, check out the PEI database.

Today’s letter was prepared by Alex Lynn with Adam LeCarmela Mendoza, Madeleine Farman and Katrina Lau.