Side Letter: TPG’s tech triumph; PE’s reputation requirements; AIP’s $5bn target

Monday is a public holiday in London and Hong Kong, so we'll return to your inbox on Tuesday. In the meantime: TPG has beaten the odds with its latest tech vintage; and reputation is proving more important than track record for some investors. Here’s today's brief, for our valued subscribers only.

Just happened

TPG: second tech fund defies fundraising headwinds (Source: Getty)

Tech-ing stock
TPG’s second tech fund has defied a fundraising chill to close above target. Launched in May 2021 with a $3 billion target, TPG Tech Adjacencies II and related vehicles collected $3.4 billion, according to a press release. The fund is more than twice the size of its predecessor, which secured $1.6 billion in 2019. According to PEI data, that fund pooled commitments from Employees’ Retirement System of the State of Hawaii and Teacher Retirement System of Texas, while the second tech fund secured $150 million of capital from Minnesota State Board of Investment.

This fund family provides capital for tech companies across all stages of growth through structured and opportunistic minority investments. TTAD is led by co-managing partners Nehal Raj, who co-leads the firm’s investment activities in software and enterprise technology across its PE platforms, and David Trujillo, who leads TPG’s internet, digital media and communications investing efforts across the firm. The two funds have deployed more than $1.8 billion in total, per TPG’s website.

“The modern era of technology investing requires flexible capital with a full-suite, full-cycle approach to investing,” said Raj in the statement. “With TTAD, we’re focused on bringing all the tools and capital solutions that are available to companies in the public markets to the private technology space.”

TPG’s close comes at a time of fundraising headwinds and deteriorating tech valuations. Closing below target seems set to become more common, even for established managers such as Carlyle Group, which collected $950 million against a $1 billion target for its latest Asia growth fund, as we reported this week. Per McKinsey’s Global Private Markets Review 2023, PE deal volumes in tech fell 21 percent last year, with the sector also seeing the largest decline in purchase price multiples. However, with valuation resets come opportunities, and GPs may now be able to back technology companies at a more favourable price. TPG’s latest vintage could prove timely.

Titans of industry
American Industrial Partners is targeting $5 billion for its latest flagship fund, according to documents prepared for the New Jersey Division of Investment‘s State Investment Council. Fund VIII is targeting a 30 percent gross IRR and 3x gross MOIC from backing North American-headquartered companies with sales greater than $500 million that are underperforming their profit potential.

The vehicle’s predecessor, American Industrial Partners Capital Fund VII, closed on $2 billion of commitments in March 2019, having launched in January of that year, according to PEI data. That fund had produced a 23.2 percent net IRR and 1.4x net TVPI as of year-end 2022, the document said. The 2015-vintage Fund VI was delivering a 26.2 net IRR, a 3x net TVPI and a 1x net DPI as of the same date. AIP did not return a request for comment.

Around the Globis
Globis Capital Partners, one of Japan’s largest and oldest VC firms, has expanded into the US after almost doubling the size of its previous fund. The Tokyo-based firm has opened a San Francisco office to support the expansion of its portfolio companies, per a statement. The move coincides with the close of its Fund VII on 72.7 billion yen ($543.4 million; €492 million) after exactly a year in market. The vehicle is almost twice the size of its 2019-vintage predecessor, which collected 40 billion yen. It plans to deploy no more than 10 billion yen per company. Japan’s VC scene is nascent yet growing, with VC fundraising steadily on the rise in recent years as the country and its investors place a greater focus on digitalisation.

They did the math

Reputation, reputation, reputation
For financial advisers and their clients, the reputation of managers remains more important than past performance. That’s according to findings from the yet-to-be published, second annual Advisor Trends in Private Markets 2023 survey from Blackstone and research company SHOOK, which Side Letter has seen exclusively. When picking managers, transparency, educational materials and firm size were also important considerations. Here are some other notable findings:

  • More than two-thirds (71 percent) of advisers allocated between 6 percent and 20 percent of client portfolios to alternatives, up from 53 percent last year
  • The top three drivers of allocations are greater diversification (34 percent), lower volatility (29 percent) and performance expectations (21 percent)
  • Real estate was the most popular asset class among advisers, who raised alts allocations at 40 percent, followed by private equity at 37 percent and private credit at 36 percent.


Speaking of reputation…
A recent report published by communications firm Peregrine has ranked CEOs of the world’s 150 largest asset managers based on how they cultivate brand awareness for their firms. The CEO Report 2023 named Larry Fink, CEO of BlackRock, as the most effective leader, with the CEOs of HSBC Global Asset Management, JPMorgan Asset Management, Vista Equity Partners and Goldman Sachs Asset Management following behind. The report measured brand awareness via five metrics: personal brand momentum, personal brand awareness, follower reach and average engagement on social media, presence in high-value media, and media sentiment.

Peregrine noted that public interest in Fink vastly outpaces that of BlackRock itself: in the first week of 2023, there were 700,000 searches of his name online. BlackRock – the third most searched-for asset manager, according to the report – recorded a figure only one-third of that number. However, this spike in interest most likely stemmed from controversy surrounding BlackRock’s ESG goals at the end of last year, highlighting the risk associated with what the report calls the “celebrity status” of being a CEO.

Other findings from the report included the fact that 37 percent of CEOs surveyed have been in their post for more than 20 years, and that 80 percent of leaders with the highest brand awareness scores are also the founders of their firms.

Sixpoint’s acquisition
Placement agent and advisory firm Sixpoint Partners last week agreed to be acquired by global investment bank Harris Williams. Side Letter sent a few questions to Eric Zoller, Sixpoint’s founder, to try to find out more about the partnership. Post-close, the firm will operate under the Harris Williams brand, with Sixpoint renamed Harris Williams Private Capital Advisory. The two firms have worked together for many years on “joint execution of select engagements”, Zoller said.

The acquisition means the combined team will be able to support its clients “throughout the life cycle of their firms” across M&A, capital solutions and primary fund placement, he added. When asked what the combined firms’ growth plans are in terms of headcount, global offices and areas of focus, Zoller said the goal was to “continue growing” across “geographies and business areas”, without giving specifics.

Aiming HIG-h?
Miami-headquartered HIG Capital has gathered $1.1 billion for its Advantage Buyout Fund II, per an SEC filing. Its target is unclear and the firm declined to comment on the fundraise. The vehicle’s predecessor collected $3 billion against a target of $2.75 billion in 2018. Fund II, which launched in April last year, will make control equity investments in companies with EBITDA between $25 million and $100 million. Virginia Retirement System and Alaska Permanent Fund committed $150 million and $40 million respectively to the vehicle, PEI data shows.

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