Side Letter: SPACs’ declining popularity; Partners Group taps Apollo; Spanish PE on the up

Panellists at the London School of Economics Alternative Investments Conference believe SPACs are on the way out. Plus: An Apollo veteran has moved to Partners Group and investment in Spain reaches an all-time high. Here’s today's brief, for our valued subscribers only.

Just happened

High interest rates will ‘drive some discipline in the [PE] industry’ (Source: Getty)

Notes from the LSE AIC
Side Letter has been at the London School of Economics Alternative Investments Conference yesterday and today, where key topics included tech investing, maximising value in venture capital and career learnings from Europe’s most senior PE executives. Here are some takeaways from day one of the event:

  • High interest rates are positive for PE. “The end of free money is good news for PE,” said Simon Marc, global head of private equity and strategic partnership at PSP Investments, the pension manager of Canada’s Public Sector Pension Investment Board, as Private Equity International reported. Essentially, this means the price of assets will come down and will “drive some discipline in the industry”.
  • No to SPACs. “SPACs are a remarkably inefficient, transparent and poor way of owning companies,” said a managing partner of a European GP speaking under the Chatham House rule. The senior exec added that all the method does is take a company public and introduce a lot of conflicts of interest. “It’s not good for the company itself, it’s not good for the underlying investors.” Proponents of SPACs, whom the exec calls “SPAC men”, usually “live in caves and come out every now and then”, at which point they are “great talkers and promoters”. That happened in 2013 and again in 2021, the panellist noted, adding that their own firm was previously approached by investment banks to raise SPACs. They decided not to jump on it this time.
  • LP evolution in VC. The last decade has seen an evolution in how LPs allocate capital to venture, which is no longer a copy and paste of PE fund terms, said Carlos Espinal, a managing partner at Seedcamp. New instruments on fund structuring and GP commitments have enabled investors, GPs and family offices to make bets and generate innovation on how to package money and give it to organisations with fast growth.

Partners Group in Japan
Partners Group has hired Teppei Kawai as its head of client solutions in Japan and head of its Tokyo office, per a statement seen by Side Letter. The hire follows the appointment of Tatsuya Ochi as the firm’s head of private equity directs in the country. Kawai will begin his new role in April. He and his team will be responsible for growing the firm’s presence in Japan. Kawai was previously head of client and product solutions in Japan at Apollo Global Management.Partners Group expects to raise between $17 billion and $22 billion this year, according to its H2 2022 AUM statement. It will also launch a number of next-generation flagship strategies in the second half.


The investment terrain in Spain
Private capital investment in Spain reached an all-time high of €8.74 billion over 935 investments in 2022 – that’s per first estimates made by the European Data Cooperative and obtained by industry body SpainCap. This marks the second-best year on record for private equity specifically, with €7.23 billion invested across 190 deals in the country.

The Spanish investment landscape has remained robust in the face of the macroeconomic turmoil that has been impacting all European markets since Russia’s invasion of Ukraine almost a year ago. While funds raised by Spanish GPs did decline as a result of this turbulence – €2.01 billion, down 36 percent on 2021’s total – a record number of deals valued at over €100 million took place. The industries with the highest investment volume were IT (24.5 percent), industrial products and services (14 percent) and hospitality and leisure (13 percent).

Oriol Pinya, president of SpainCap, said in a statement: “Despite the global economic slowdown, our industry remains optimistic and committed to new companies and staff, with a new record of investment volume and number of deals.”

The release also notes that international funds continue to have a strong appetite, abundant liquidity and a proven interest in the Spanish market. Recent taxation changes, which Side Letter reported on at the start of the month, may encourage further investment in Spain: its Startup Law, which sees carry taxed as employment income rather than capital gains, has been designed to encourage start-up creation and investment in the country. As we head further into 2023, it looks like the Iberian peninsula will be one to watch.

San Fran’s secondaries move
San Francisco Employees’ Retirement System is upping the amount it may invest in a secondaries deal: the new figures stands at as much as 0.1 percent of the $33 billion plan’s total assets, or $33 million, per a report from affiliate title Buyouts (subscription required). That’s an increase of 65 percent from the $20 million upper limit it was previously allowed to pay for such deals. The changes, which also allow the pension to invest in fund stakes of GPs it hasn’t backed before, were approved in a board meeting last week.

San Francisco has been an active seller on the secondaries market in the past, having sold stakes in 59 PE funds for $541 million in NAV in 2019, Buyouts reported. In case you missed it, affiliate title Secondaries Investor reported that industry participants predict an increasing number of LPs will flock to the secondaries market this year as more buying opportunities crop up. You can give that a read here (registration required).

Today’s letter was prepared by Helen de Beer with Adam Le and Carmela Mendoza.