TA-king a pause
TA Associates has paused fundraising on its third Select Opportunities Fund amid a tougher environment, our colleagues at Buyouts report (registration required). Select Opportunities III was seeking $1.5 billion and expected to hold a first close around March. The vehicle had been intended to pick up minority stakes in certain portfolio companies that its main fund was selling as a way to hold those investments for longer. The growth firm gathered $1 billion for its 2019-vintage Select Opportunities Fund and $1.5 billion for its 2021-vintage successor. The former had generated a 1.17x TVPI and 10.44 percent IRR as of 30 June 2022, according to UTIMCO figures.
TA recently told investors it was pausing the fundraise to focus solely on its flagship TA XV. “We believe this will reduce organisational complexity and are excited to address these investment opportunities on a selective basis, as we have been, through our flagship fund series,” it said in a note to LPs. Fund XV has a $15 billion target, Private Equity International data shows. While the firm’s exact motivations for pulling the fundraise are unclear, sources Buyouts spoke to pointed to “LP fatigue”; another described double-down strategies as a “relic of the high-growth era” that ended with recent interest rate hikes.
While California Public Employees’ Retirement System may be thinking about opportunities arising from the Silicon Valley Bank collapse, its peer and neighbour, California State Teachers’ Retirement System, seems less effusive. The second-largest public pension fund in the US is unlikely to step in and fill the resulting VC financing gap, CIO Chris Ailman told Bloomberg on Wednesday. “You’re already seeing some of the big private equity firms that are asset managers – they are not banks – but they are willing to step into that void and provide that liquidity financing. We’re not going do it because we don’t want to be a bank subject to those kinds of regulations.”
CalPERS CIO Nicole Musicco said in the pension’s recent investment committee meeting that the pension could take advantage of the situation as it looks to increase its focus on direct investing and lending. By contrast, Ailman noted that CalSTRS is not “very heavy” in venture capital because of its size.
Apax by any other name
France’s Apax Partners SAS has rebranded as Seven2. The decision reflects part of its ambition to become a “leading private equity player in Europe”, per a statement. Its new moniker is reference to the first steps of its creation in 1972 when Alan Patricof, Sir Ronald Cohen and Maurice Tchénio joined forces to create a venture capital firm.
The Apax name will still be used for some of Seven2’s activities moving forward, president Eddie Misrahi noted in the statement announcing the rebrand: its dedicated private clients’ services will fall under the label Apax by Seven2; its life insurance fund will be rebranded APEO (Apax Private Equity Opportunities); and its philanthropy fund will remain the Apax Philanthropy Fund. Seven2 closed on €1.6 billion for its 10th mid-market fund in 2021 against a €1.2 billion target.
London-headquartered Apax Partners will continue to operate under the name.
Next stop, India
Korea Investment Corporation is setting up shop in Mumbai, Korea Economic Daily reports. The expansion marks the sovereign wealth fund’s fifth overseas office, following bases in London, Singapore, New York and San Francisco. KIC’s latest stretch into South Asia aligns with the fund’s intent to explore opportunities in “promising growth areas”, as Side Letter noted earlier this month.
The $169.3 billion fund plans to raise its alternatives allocation from 18 percent in 2021 to 26 percent by 2025. Such assets returned 14.7 percent for KIC last year, despite a 14.4 percent loss on their overall portfolio. The institution will be exploring strategies such as secondaries to combat turbulence, while reinvesting with current managers and finding “excellent” new ones.
Diminished activity in China over recent years has contributed to some PE players digging further into other parts of Asia, with India likely to be a leading beneficiary. KIC isn’t the only LP drawn to the market: Canada’s Ontario Teachers’ Pension Plan also established a Mumbai office just last year.
To be continued…
PE firms are increasingly factoring in the use of continuation funds as an alternative to exits, our colleagues at Secondaries Investor report (registration required). At least 11 GPs launched or closed multiple continuation funds in 2022, per Credit Suisse’s 2022 Secondary Market Review. These managers are using continuation funds in a way that is “no different from planning for an M&A sale or IPO”, David Klein, co-head of the private fund group at Credit Suisse, told Secondaries Investor.
GP-led deals were outpaced by LP-led transactions last year: of the $100 billion in secondaries volume, $55 billion went to LP-led deals, according to the report. Around 150 GP-led transactions were launched last year, with the median size of GP-led transactions sitting at $609 million. Credit Suisse anticipates GP-led transactions will see a resurgence in volume this year, driven by missed exits in 2022.
Today’s letter was prepared by Alex Lynn with Carmela Mendoza, Helen de Beer, Madeleine Farman and Katrina Lau.