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The Wire Feb. 2, 2022
Great Hill closes Fund VIII in quick time on $4.65bn, Exploring the transparency question in PE Happy Wednesday!
This is Chris, on the Wire for MK.
What do you have going this morning? I have a reminder for yinz: deadline for our Deal of the Year is coming up quick – Friday, Feb. 11. So get your candidates in now. Send them to me at [email protected]. Visit here for more info about the awards.
Debate: Last fall, I tuned into a great discussion between a U.S. Senator from Louisiana and the state Treasurer from Illinois about private equity investing. The back and forth helped illustrate the special lengths private equity LPs go to justify the LP/GP relationship, which includes some level of ambiguity on the exact costs of the strategy.
“Are you telling me that you make private equity investments as a fiduciary without understanding the fees and, if so, whose fault is that?” asked Louisiana Senator John Kennedy during a hearing of the Senate banking committee last year.
He compared the situation to buying a car: “If I go to buy a car, and the car salesman doesn’t explain the details of the financing to me, I just walk away. I don’t call for the federal government to take over every car salesman in America. What am I missing here?”
The treasurer, Michael Frerichs, said Illinois’s state pension system, one of the largest investors in private equity funds, is forced to spend money analyzing and monitoring its private equity portfolio simply to make sure that it is paying proper fees and expenses.
So why back managers with opaque fees and expenses? It’s a reasonable question, and one that gets to the heart of the idiosyncrasies of private equity investing, especially considering the transparency that exists in the public markets. Read my cover story here on Buyouts.
Bunch o’ deals: There’s been a slew of secondaries activity this month. Most recently, I covered a big sale from Shell’s corporate pension, which is selling an around $1.3 billion portfolio of stakes in mostly older PE funds. This comes as Dutch pension administrator APG is shopping a portfolio of around 1.5 billion euros of PE fund stakes.
Meanwhile, Siguler Guff closed a clean-up process involving its 2008 vintage Fund III, offering LPs several options for liquidity out of the older pool. Fund III was about half made up of interests in publicly traded Royal Pharma, and half in illiquid holdings in shipping assets, real estate, stakes in commingled funds and coinvestments.
Interestingly, the secondary adviser on the deal was Brant Street Capital, which helped Siguler Guff work through a secondary sale a few years ago. Check it out there on Buyouts.
That’s it for me! Have a great rest of your day. Reach me with tips n’ gossip, feedback or book recommendations at [email protected] or find me on LinkedIn.
Read the full wire commentary on PE Hub ...
Also of note (may require subscriptions) DIF Capital Partners is set to begin a new round of fundraising for its two equity vehicles, targeting a combined €5.5 billion, Infrastructure Investor understands.
"The chief executive of Novartis has said the company is keeping an open mind on the future of its generics business Sandoz after it emerged that private equity firms were interested in buying it." (Financial Times)
"Chris Gaffney, a co-founder and managing director of [Great Hill Partners], reflects on the latest fundraising, the volatility in technology stocks and how that affects Great Hill’s investment approach." (WSJ Pro)
"RCF Management LLC, one of Iamgold Corp.’s biggest shareholders, is pushing for a revamp of its board of directors, saying the Canadian gold company is poorly managed and in need of an urgent fix." (Globe and Mail)
On the inaugural podcast for The Cornfield Capitalists, Paul Ford, founder and managing partner of DS9 Capital, talks about the 'B-word' problem in private equity and venture capital. "If you don't mention the 'B' word to private equity and investors, they don't want to talk to you any further. And that 'B' word is 'billions.' I personally focus on building a business and taking it from $0 to about $150-$300 million in enterprise value. I think anyone in their right mind would say: 'That's amazing Paul, how many times do you think you can do that in your lifetime?'"
"Activists are taking advantage of slumping stock prices to push for changes at some of the U.K.’s biggest publicly traded companies." (Wall Street Journal)
"Cedar Fair LP said SeaWorld Entertainment Inc. has proposed a deal that would combine two theme park operators as the entertainment industry plots its future amid Covid-19 uncertainty." (Wall Street Journal)
"Massachusetts’ largest public-pension fund is set to put more money toward private equity, after a year in which the asset class delivered the strongest performance of any of the fund’s investment categories." (WSJ Pro)
PE Deals
They said it “I feel like [SEC] chairman Gary Gensler has been walking around with a sign over his head saying, ‘regulation is coming.’ He’s been making it clear, every time he speaks, that private funds [should] watch out, regulations are coming, and it’ll probably be coming next year. [This] tells me there are rules being written as we speak… and changes are coming and we should be looking for those proposals in the first half of 2022.” — Amy Lynch, founder and president of FrontLine Compliance, predicted to Buyouts last year (correctly) about the coming wave of PE regulations.
Today's letter was prepared by MK Flynn Subscribe now to get full, unlimited access to all PE Hub content, including every PE Hub Wire article. FIND OUT MOREPlease visit Buyouts for the latest insight into LP activity and Venture Capital Journal for comprehensive coverage and analysis of what’s happening in VC.
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