Side Letter: SoftBank Vision Fund incentive tweak, ESG real-time data pipedream

SoftBank has tweaked an employee incentive on its first Vision Fund. Plus: why real-time ESG data could be a pipedream and video conferencing tool designed for fundraising. Here's today's brief, for our valued subscribers only.

They said it

“As an LP that needs to put money to work rather than having significant contingent liabilities, I have mixed feelings on this topic. There is a clear advantage in short-term lines of perhaps three months to smooth fund operations, but long-term facilities are unhelpful to us.”

Peter Linthwaite, head of PE at Royal London Asset Management. discusses the rise of subscription credit facilities with sister title Private Funds CFO (registration or subscription required).

Just happened

SoftBank’s incentive
SoftBank has tweaked an employee incentive on its $98.6 billion Vision Fund. The conglomerate’s $33.1 billion commitment to Fund I previously included $5 billion earmarked for an incentive scheme reportedly used to loan staff money to buy into the vehicle. However, this figure has now been slashed to $2.5 billion, per a footnote in the firm’s latest earnings statement, published Monday. The implications of this change are unclear. However, Fund I is known to have struggled with performance in recent years. The firm has committed $10 billion of its own money to Vision Fund II before seeking third-party capital as a result.

The ESG pipe dream
A lack of reliable data is commonly cited as one of the biggest obstacles to PE’s push on ESG. PEI‘s latest Responsible Investment Special explores whether real-time data around non-financial KPIs is a pipe dream. Spoiler alert: while the technology and expertise to communicate these statistics with regularity already exists, don’t expect it to happen any time soon.

Also under the microscope today: diversity and due diligence. While conducting ESG due diligence on a target has become commonplace, PEI profiles a UK GP that has gone a step further to create a proprietary methodology spotlighting potential ethical, integrity and reputational issues. We also look at an emerging markets firm with a fund dedicated to improving the living standards of women in South-East Asia.

Here’s another tool for virtual fundraising. Fintech platform Palico has added what it says is the world’s first video service integrated into a digital PE fundraising platform. Palicalls is an encrypted video conferencing tool (video here) hosted directly on Palico’s platform. LPs and GPs can book video meetings via a dedicated dashboard that includes all fundraising materials. It is set to roll out additional features, including a webinar tool for GPs – as a part of an electronic road show in the coming months, according to a spokesman for the firm.


Pardee’s lawsuit
Alan Pardee, a co-founder of placement agent Mercury Capital Advisors who left last year, is suing his former firm, documents filed to New York State’s Supreme Court show. Pardee’s lawsuit alleges that Mercury hired white males like himself while sidelining minorities and women. Mercury categorically denied what it called the “meritless claims” in a statement to sister title Buyouts (subscription or registration required), noting that its senior leadership team comprises equal numbers of men and women. The dispute comes amid intense focus from LPs over PE’s diversity efforts, as Side Letter explored last week.

LPs on film
How do LPs really feel about virtual due diligence? That’s one of the questions asked by Nicole Douglas, head of investor research at PEI, in a recent video interview with private markets investors and advisors. Douglas caught up with Andrea Auerbach, head of global private investments at Cambridge Associates; Simon Faure, managing director at M&G Private Fund Investments; Claire Madden, managing partner of Connection Capital; and Chris Schelling, managing director at Windmuehle, to discuss the slew of challenges faced last year and what they expect to happen next.

Defaults declining – at least for now
Is the crisis already over? Proskauer’s latest Credit Default Index shows the level of defaults in senior secured and unitranche loans falling to 3.6 percent in the fourth quarter of last year. This represents a continuing improvement from the second and third quarters, which had default rates of 8.1 percent and 4.2 percent respectively.

“The decline in the default rate reflects the improvements we are seeing across our practice. Private credit lenders are continuing to work with their borrowers to provide the liquidity and flexibility that they need to navigate through these uncertain times,” said Stephen Boyko, co-chair of Proskauer’s corporate department and private credit group.

That’s the good news. Worth bearing in mind that the default rate was typically around the 2 percent mark pre-covid-19, so today’s success story is relative. Furthermore, let’s not forget the support schemes that have propped up companies in the short term and which may yet fall over.

Dig deeper

Institution: Cathay Life Insurance
Headquarters: Taipei, Taiwan
AUM: NT$6.63 trillion

Cathay Life Insurance has confirmed $145.7 million-worth of private equity commitments to two vehicles according to recent press releases.

The commitments comprises of $50 million to Blackstone Strategic Capital Holdings II and €80 million to EQT Infrastructure Fund V.

Most of the Taiwanese insurer’s recent private equity commitments have been made through buyout funds across different sectors in North America.

For more information on Cathay Life Insurance, as well as more than 5,900 other institutions, check out the PEI database.

Today’s letter was prepared by Alex Lynn with Andy Thomson and Carmela Mendoza.

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