Side Letter: TPG targets secondaries, GIC results, HNWIs betting on unicorns

The secondaries market slowed right down in H1, but that won't dissuade private equity's mega firms – TPG, for example – from trying to break into that market. Here's today's brief, for our valued subscribers only. 

They said it

“Data is limited, investors don’t have it and private asset managers have been very secretive in the past.”

On a webinar yesterday, BlackRock‘s alternatives head Edwin Conway describes the difficulty institutions have when conducting due dilignece on private equity firms. Read the report here.

Just happened

Getting into secondaries

Canada Pension Plan Investment Board has been a conveyor belt of secondaries talent, producing the nucleus of preferred equity specialist Whitehorse Liquidity Partners and several professionals in our annual list of next generation secondaries leaders. Now its head of secondaries, Michael Woolhouse, is embarking on a new challenge, leading TPG’s expansion in the secondaries market.

Multi-strategy managers exploring adding secondaries units has been a key theme of 2020. In early July, Brookfield Asset Management hired two Partners Group execs to help launch a real estate secondaries business. CVC Capital Partners has had conversations with potential candidates about launching a private equity secondaries unit. PEI heard that TPG would buy a fully formed secondaries operation, though clearly they opted for the organic route.

With this move, four of the 10 largest groups on the PEI 300, our ranking of the largest fundraisers, now have secondaries units. To see who does and doesn’t, click here.

They did the math

Secondaries freeze. The coronavirus fallout has put the brakes on private equity secondaries activity in H1. Meanwhile, the much smaller market for infrastructure secondaries seems to be rolling on; Blackstone’s secondaries unit, Strategic Partners, has just raised a $3.75 billion infra secondaries fund and in H1 acquired a $1 billion portfolio of infra stakes from Alaska Permanent Fund.


Betting on unicorns

Private markets are gradually opening up for HNWIs. The latest niche to welcome individuals is pre-IPO unicorns. Although individuals have not been precluded from buying stakes in pre-IPO businesses, these stakes can be saddled with cumbersome governance arrangements and are not guaranteed to enjoy a successful listing; Uber, WeWork and Lyft remind us of the accompanying hazards. CLSA has come up with a product that will allow it to offer HNWIs exposure to a portfolio of around two-dozen assets, thus reducing the concentration risk associated with buying a direct stake in one company with the expectation that it will go public. We explore the strategy in greater detail here.

GIC results

Singaporean state-owned asset manager GIC published its annual report yesterday:

  • Private equity accounts for 14 percent of its $360 billion in assets (up from 12 percent from the previous year);
  • The annualised 20-year real return (above global inflation) for the whole GIC portfolio was 2.7 percent, its lowest since 2009, “largely due to a very strong tech-bubble year return in FY1999/2000 dropping out of this 20-year window, and to a lesser extent, the drawdown of global markets over the last year”.

The annual report can be accessed here.

Dig deeper

Institution: Cathay Life Insurance
Headquarters: Taipei, Taiwan
AUM: NT$6.21 trillion

Cathay Life Insurance has agreed to commit $60 million to TPG Growth V. The private equity vehicle is managed by TPG and will target the healthcare, business services, technology, media and telecommunications sectors across North America, Middle East Africa and Asia-Pacific.

As illustrated below, Cathay Life Insurance’s recent private equity commitments have focused on buyout and venture capital strategies.

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

Today’s letter was prepared by Toby Mitchenall with Rod James, Carmela Mendoza and Alex Lynn.

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