They said it
“So far as carried interest and management equity are concerned, the boundary between income and capital is conceptually drawn in the right place.”
No change, please: The British Private Equity & Venture Capital Association makes a succinct statement on the tax treatment of carried interest.
Lessons from the VC buyside
Our West Coast bureau chief Lawrence Aragon recently corralled six heavyweight LPs. The discussion was VC-centric, but the takeaways were universal:
- The best technology, like the best PE returns, is forged in the crucible of a downturn. “There is plenty of data that says some of the best technology is formed during periods of economic downturn or depression,” says Matt Curtolo, a director of private equity for the $601 billion MetLife Investment Management. “We believe there is going to be a lot of great innovation that comes out of this time period.”
- Access to top funds is tough to get, especially in smaller, early stage funds. The solution? For the Maryland State Retirement and Pension System, it has been a separately managed account with Tiger Iron Capital. Says senior portfolio manager Dana Johns: “There have been times where we targeted $15 million to $20 million for a commitment and we got $5 million, but in the next fund we’re getting a larger allocation.”
- Another solution? Get in early with emerging managers. Says Sean Holland, a director for the $500 billion New York Life Investment Management: “It’s important to keep the door open and talk to people when they spin off.” Adds Kevin Schimelfenig, managing partner of McGeever Family Office: “When a key fund manager departs, we tend to get some exposure that we wouldn’t usually get. For us, it is a wonderful thing when they step out.”
- Overall, GPs get a good report card for crisis communications from this group of investors. This comment from James Ko, a portfolio manager with the $11 billion Arizona Public Safety Personnel Retirement System, sums it up: “The cadence [of communication] has been just as strong and the transparency has been strong. Overall, the experience has been pretty positive in terms of getting information and data that’s required.”
Subscribers to Venture Capital Journal can read the full report here.
Bridgepoint hits hard-cap
PEI Media owner Bridgepoint has almost tripled its firepower for lower mid-market deals in western Europe with a £1.5 billion ($2 billion; €1.7 billion) haul for its fourth development capital fund. The fund is yet to hold its final close.
Palladium picks up Bamboo stake
Impact advisory and management firm Palladium has picked up a 8.5 percent minority stake in Luxembourg-based impact firm Bamboo Capital Partners, according to a statement. Capital from the transaction, which was funded from Palladium’s balance sheet, will be used to accelerate the scale up of Bamboo’s business as well as the development of SGD500, its $500 million impact platform, Christopher Hirst, chief executive of Palladium tells Side Letter.
Following the transaction, Bamboo will become the asset management arm of Palladium, which also has an investment business focused on backing SMEs globally. Financial details of the deal were not disclosed, but it was structured with the ability for Palladium to increase its stake in Bamboo in the future, Hirst says. Schroders’ acquisition of microfinance and impact investor BlueOrchard Finance last year was similar.
Smaller investors and secondaries
Small investors could be a key source of secondaries dealflow and GPs should encourage it, said a senior secondaries executive at PEI’s Investor Relations, Marketing & Communications Forum. Non-institutional LPs realise they could be “stuck in some funds for a while” and want to reduce the cost of administering their portfolios.
“If you’re not going to be working with me in the future, could we try to sell your position and find a secondary buyer who could perhaps provide staple financing to the next fund?” he said.
The PE community did not lament the day in June when its loudest critic Ludovic Phalippou revealed he had nothing more to say on performance and fees. Well… the Oxford University Saïd Business School professor is back. He took to LinkedIn on Tuesday to announce a new presentation on ESG and impact. “As always, it is meant to be provocative,” he warns.
Guess who’s SPAC
Ravi Thakran, former managing partner of consumer specialist L Catterton Asia, has resurfaced as chief executive of a new special purpose acquisition company. Aspirational Consumer Lifestyle Corp will seek up to $225 million at IPO to invest in premium consumer brands focusing on millennials and Generation Z, per an SEC filing. Thakran had announced plans in July to build a private equity platform targeting consumer brands in emerging Asia’s mid-market.
Institution: Teachers’ Retirement System of Louisiana
Headquarters: Baton Rouge, US
AUM: $20.02 billion
Allocation to alternatives: 38.0%
The $20.02 billion US public pension has a 14.0 percent target allocation to private equity that currently stands at 17.0 percent.
As illustrated below, the pension fund’s recent commitments are to vehicles focused on the technology and healthcare sectors within the Asia-Pacific, North America and Europe regions.
For more information on TRSL, as well as more than 5,900 other institutions, check out the PEI database.