Side Letter: UK PE’s transparency push; California pension’s $1bn allocation hike; Jersey’s new LLC

The UK's private equity industry is making a concerted effort to improve transparency. Plus: Alameda County's $10 billion pension has major plans for PE and Jersey Finance wants to help US managers market to European investors. Here’s today's brief, for our valued subscribers only.

Just happened

Shining a light on UK PE
The Private Equity Reporting Group – an independent body set up on behalf of the British Private Equity and Venture Capital Association – on Monday launched its 15th set of annual reports promoting transparency among the UK’s largest portfolio companies. A highlight of this year’s reporting is the launch of a one-stop platform enabling industry participants to more easily source information about UK PE. A section on the website compiles all financial and investor reports from the 70-plus portfolio companies that fall within the scope of the Walker Guidelines – reporting standards introduced in 2007 to manage transparency and disclosure in private markets.

At a media conference attended by Side Letter, BVCA director general Michael Moore and PERG chairman Nick Land unveiled the findings of the three reports that make up this year’s series: PERG’s Fifteenth Annual Report, PwC’s Good practice reporting by portfolio companies and EY’s Annual report on the performance of portfolio companies, XV.

“What do these reports aim to do?” Land said. “Well, first, they aim to present independently prepared information, clearly and simply with maximum transparency. The reports inform the broader business and public debate on the impact of private equity ownership on large UK businesses and also help… to demonstrate [the] specific contribution to the UK economy that private equity makes.” On this note, Moore pointed out that two million jobs are supported by PE across the UK, with the industry representing approximately 5 percent of the country’s GDP output.

Land and Moore both acknowledged that the level of transparency available across PE, which is “night and day” when compared with 15 years ago, still has some way to go. Explaining that portfolio companies are graded as ‘excellent’, ‘good’ or ‘basic’ with regards to their disclosure, Land said: “PwC judged 60 percent [of portfolio companies] prepared disclosures to a good standard, and all met the basic standard… This year, we didn’t have any ones that were judged to be excellent… Weaker areas this year were the financial [reporting] at the year-end… and the other sort of area that was a little bit disappointing was around employee reporting.”

Moving forward, continually reviewing the level of disclosure within portfolio companies may be the key to greater understanding of private markets across the public sphere. As Land noted: “It can always be improved.”

Alameda ups the ante
Fundraising GPs take note: Alameda County Employees’ Retirement Association has a big appetite. The $10.4 billion Californian pension plans to commit more than $1.1 billion to PE over the next four years to hit its 11 percent target allocation by 2027, our colleagues at Buyouts report (registration required). ACERA has a roughly 9 percent exposure to PE across buyouts, venture capital and debt/special situations. Of the proposed $1.1 billion commitment, the bulk will go towards buyouts, with $624 million slated for between nine and 12 new funds.

Finding itself underweight to PE leaves ACERA open to new opportunities at a time when many of its peers are backing off to bring their allocations under control, and there appears to be a chance some of its $1.1 billion will end up overseas. Speaking at the African Private Equity and Venture Capital Association’s annual conference last year, ACERA trustee Tarrell Gamble said US LPs have a “fear of missing out” on international opportunities. “FOMO is real. That’s just how it is. Particularly now in the US where there is so much dry powder for PE – almost $2 trillion of uncalled capital waiting for an investment opportunity.”

Have your say
Are you a woman in finance? Our colleagues at Responsible Investor want to hear from you. International Women’s Day takes place next month and to mark the event, RI is planning a week of coverage focusing on gender in the investment industry. In preparation for this, they want to hear from readers about why people think representation is still so low and what the industry could do to increase gender inclusivity. To get a better understanding of the situation, we’d like to ask you to take part in an anonymous survey to share your experiences and thoughts on this topic.


Marketing to Europe
As more offshore jurisdictions find themselves on the EU AML blacklist, US managers are having a hard time marketing into Europe. Enter: Jersey Finance’s new LLC structure, which is modelled on existing LLC structures in other jurisdictions in Cayman and Delaware, our colleagues at Private Funds CFO report (registration required).

Elliot Refson, head of funds for Jersey Finance, said the new LLC structure offers quick and easy access into Europe for US managers through National Private Placement regimes. Because Jersey is not viewed as a high-risk area under the latest European laws against money laundering, the new LLC structure offers a “future proof” option for marketing under the Alternative Investment Fund Manager Directive and other European directives, he added. Funds business from US promoters in Jersey has more than doubled over the past five years, according to Private Funds CFO.

Yuan love
A few years back, it was common to find Chinese GPs with yuan-denominated funds launching GP-led processes to kickstart their debut USD strategy. Now, amid rising geopolitical tensions and deglobalisation trends, more firms are instead turning to China’s Qualified Foreign Limited Partner scheme to turn dollars into yuan. Beijing’s Primavera Capital is among the latest to do so, according to a post on messaging service WeChat.

Primavera Yongzhi (Wuxi) Enterprise Management Co and Primavera Venture Partners Fund I, a USD VC fund, have jointly launched the $100 million Changzhou Primavera Zhike Equity Investment Partnership. The new vehicle will use China’s QFLP scheme to back domestic artificial intelligence, intelligent manufacturing and next-generation information technology companies.

QFLP approvals are still comparatively few and far between. Hamilton Lane was among the latest to become approved in May and this month launched a Shanghai office to pursue a yuan-denominated secondaries strategy. In 2020, Schroders Capital was cleared by Shanghai to launch its first USD to yuan vehicle targeting primary fund commitments, secondaries transactions and co-investments in the domestic market. The QFLP scheme gives foreign investors access to a market that is magnitudes larger, and less competitive, than China’s USD segment.

Today’s letter was prepared by Alex Lynn with Helen de Beer and Madeleine Farman.

– This article was updated to correct the size of Changzhou Primavera Zhike Equity Investment Partnership. It is understood to be $100 million.