Side Letter: TPG’s tough road, Infra Berlin bonanza, Yale to the king

LPs have questions for TPG over its governance structures as the firm's second Rise Fund faces a tough road ahead. Here’s today's brief, for our valued subscribers only.

Just happened

Rising to the challenge

It’s full steam ahead with fundraising for TPG’s second Rise Fund, targeting $3.5 billion, despite the departure of founder Bill McGlashan. It will undoubtedly be a tougher road.

Investor sources tell us the LP community will have questions for TPG, particularly around governance structures, and a fair few will likely wait to see whether their peers make commitments before they take the leap.

It’s tough to fault TPG for how it has handled the situation so far: not only was it swift to remove McGlashan and reassure investors, it smartly offered those LPs that committed to Fund II prior to February’s first close the chance to reaffirm their commitments.

Meanwhile, McGlashan and TPG clashed on Friday as to which party severed the ties, with TPG saying McGlashan was “terminated for cause” and McGlashan saying he had handed in his resignation prior to the termination. The Financial Times reports (paywall) it has seen an email chain between the two that supports McGlashan’s version of events.

Get thee to Berlin

If you have even a passing interest in infrastructure, you should hot-foot it to Berlin this week for sister title Infrastructure Investor’s Global Summit, where more than 2,000 of the industry’s finest will be gathering for a four-day climate-neutral infra extravaganza. If you need any more persuading, 500-plus institutional investors will be in attendance representing more than $1 trillion of infra capital. Check out this column from II’s senior editor Bruno Alves on what to expect at the event – and if you are in town, drop him a line: bruno.a@peimedia.com

Essentials

Yale’s alternative path. How does Yale consistently outperform its peers? By having a heftier-than-average allocation to alternatives, of course. In the last 10 years, private markets have helped the $29.4 billion endowment add $6.5 billion in value, according to Chief Investment Officer. Yale’s allocation of 14.1 percent to leveraged buyouts is way ahead of the educational institutional mean of 6.1 percent, while its allocations to real estate and venture capital are three times the educational institution mean, CIO writes.

Banks. Who needs ’em? Credit giants’ ability to write ever-larger tickets is increasingly muscling banks out of buyouts. Take Blackstone’s GSO Capital Partners’ offer of a €1.5 billion unitranche loan to back Advent International’s acquisition of Evonik’s acrylic sheets business, which – had Advent accepted – would have been the largest private debt deal to date. Even though it didn’t go through, it’s still significant, Private Debt Investor’s senior editor Andy Thomson writes, because it shows that private debt has more than come into its own: some firms could rival the syndicated loan market, which may benefit private equity sponsors when capital markets could otherwise be closed.

Is Asia’s PE party nearly over? Dark clouds loom for Asia-Pacific private equity, says Bain & Company. While Asia has been unstoppable in recent years (and now has about $883 billion in total AUM, about a quarter of the global private market), several developments – macroeconomic headwinds, China’s slowdown – are signalling change. A burgeoning winner-take-all dynamic is making it tougher for smaller, lesser-known funds to survive.

LP meetings. Watch out for…

Inside tip

Abraaj’s collapse will not leave the industry’s collective memory for quite some time. What this means for the employability of its alums varies greatly depending on their role. Look out for our opinion piece exploring what could come next for Abraaj’s senior personnel soon. Any thoughts? Email alex.l@peimedia.com.

Dig deeper

Want more data? There are more than 6,700 institutions in our database, including BainTPGBlackstoneAdventYale Endowment from today’s Side Letter.

He said it

“My snarky remark would be: remember next time someone comes up here, criticises us for paying a lot of fees to private equity managers or criticises us for not indexing – we would be billions of dollars worse off as a state, we would be billions of dollars worse off as a fund were we to follow that type of advice.”

At an investment committee meeting, Oregon Investment Council CIO John Skjervem defends private equity fees.


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Today’s letter was prepared by Toby Mitchenall, Isobel Markham, Alex LynnCarmela MendozaPreeti Singh and Andrew Hedlund.