Smallest - Dow Jones

Transcription

Dow Jones
PRIVATE EQUITY
ANALYST
June 2015
Sources of Capital
Smallest
Endowments
Look Beyond
Yale Model
Small Universities Embrace PE p.14
Pension Funds Remain Top LPs p.17
INSIDE
PE Firms Speed Up Portfolio Company Exits p.20
Kentucky Raises PE Bar Amid Funding Woes p.23
Spirits Capital Toasts Millennials’ Taste Buds p.24
Heavy Debt Weighs on Weight Watchers p.38
is pleased to announce the closing of
ASIA ALTERNATIVES CAPITAL
PARTNERS IV, LP
AACP IV EX-JAPAN INVESTORS, LP
$1,000,000,000
A private equity fund-of-funds formed to
invest in a diversified portfolio of Asian managers
April 2015
The undersigned acted as the global placement agent and
arranged for the private placement of certain limited partnership interests.
contents
Comment
Limited Partners
uEditor’s Note
Japan’s GPIF and the Curse of the Large Limited Partner
uKentucky Retirement Systems Raises
3
the Bar for PE as It Faces Funding Woes
News
Fund News
uBriefs
uGeneral Partners: Buyout
Cobepa Starts U.S. Operations, SEC Examining
Blackstone Fees, Carlyle Plots Return to Silicon Valley
This Month in PEA’s Pages...
Best of Our Blogs
4
5
9
uComings & Goings
Mike Duke, Ted Ullyot, Ronald Cami, Saguna Malhotra
12
Analysis
uTop Story
Beyond Yale: Small Endowments
Embrace PE With Their Own Models
Private Equity Analyst
June 2015
Volume XXV, Issue 6
14
Spirits Capital Cheers On
Millennials’ Taste for the New
23
24
uGeneral Partners: VC
Menlo Ventures Stays Fresh
With $400M for Fund XII
25
uThe Roundup
Banc Funds Closes on Around $416M for Bank Deals
I Squared’s Debut Infrastructure Fund Collects $3B
Atlas Venture Hits $280M Cap for Biotech-Only Fund
IVP Reaches $1.4B Final Close on Fund XV
Redpoint Ventures Gathers $400M for Fund VI
Elysian Capital Hits £180M First Closing on Debut Pool
EQT Sets €6.75B Hard Cap for Latest Fundraising Effort
Lightspeed Raising Up to $115M for India-Focused Fund
26
27
30
31
32
34
35
37
Deals & Exits
uLBO Focus
Debt Weighs On Weight Watchers
as Dieters’ Habits Change
38
uVC Focus
Venture Capital Continues to Flow
Into Chinese Startups
40
People
uRising Stars
Deal Makers Dominate Europe’s
Under-40 Rising Stars
uFeatures
Pensions Are Still LP Top Dogs,
but Wealthy Investors Gain Ground
Spring Cleaning: PE Firms Exit
Portfolio Companies at Faster Pace
Amid Tepid Returns, LPs Approach
Emerging Markets Cautiously
17
20
21
uIndustry Data
Despite Exits, PE Returns Disappoint
22
42
uQ&A
A Private Word With David Wilton
44
2
June 2015
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editorial
Managing Editor, Newsletters
Nicholas Elliott
nick.elliott@wsj.com
Reporter, Private Equity
Hillary Canada
hillary.canada@wsj.com
Assistant Managing Editor,
Private Equity
Laura Kreutzer
laura.kreutzer@wsj.com
Shasha Dai
shasha.dai@wsj.com
News Editor, Private Equity
David Smagalla
david.smagalla@wsj.com
Dawn Lim
dawn.lim@wsj.com
Editor, Europe
Ayesha Javed
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Amy Or
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Editor, Venture
Mike Billings
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Lillian Rizzo
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Editor, Venture
Christopher Zinsli
christopher.zinsli@wsj.com
Reporter, Venture
Lizette Chapman
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Editor, Private Equity
Thomas Dunford
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Reporter, Venture
Yuliya Chernova
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Michael Lucas
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Reporter, Venture
Deborah Gage
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Chitra Vemuri
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Reporter, Venture
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Reporter, Asia
Sonja Cheung
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Reporter, Venture
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Reporter, Europe
Alec Macfarlane
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Reporter, Venture
Tim Hay
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comment
June 2015
3
Japan’s GPIF and the Curse
of the Large Limited Partner
Over the past five years
or so,
Japan has hardly been a robust source of capital
for private equity firms on the fundraising trail,
particularly when compared to some of its Asian
neighbors, most notably China.
But that may be about to change, thanks to recent
reforms pushed by Japanese Prime Minister Shinzo
Abe that have led to allocation shifts by the Japan’s
national pension system, the Government Pension
Investment Fund, also the world’s largest pension pool.
Over time, the GPIF expects to invest up to 5%
of its 137 trillion yen ($1.1 trillion and, yes, you
read that
correctly, trillion)
Laura Kreutzer
portfolio to
alternative assets
Assistant Managing
such as real
estate, private
Analyst
equity and
infrastructure,
mainly within
its equity and fixed income portfolios. GPIF easily
has the potential to become the largest new limited
partner the industry has seen in a long time. Even
a modest 5% allocation would translate into an
alternatives portfolio of some $50 billion.
As anyone who has lived in Japan knows well,
change often comes slowly. Expansion into
alternative assets is likely to be gradual, particularly
given the reforms underway at GPIF have
themselves been subject to political debate.
But even if the pension system starts with only
a modest 1% allocation, investing such a large
amount of capital would pose challenges both for
GPIF and the industry itself. As most fiduciaries
know well, given the time it takes for private equity
firms to find deals, GPIF will have to commit more
to the asset class than the allocated amount in
order to get the money invested.
Even if it builds a large investment staff, it will
likely need to lean heavily on large global buyout
firms, at least initially, to invest capital as efficiently
as possible. In an environment where pricing
for investments has already approaching, if not
exceeding, boom-era levels, an influx of even more
capital could put downward pressure on the very
returns GPIF needs to help support the nation’s
rapidly aging population.
That said, even a dip in median private equity
returns may still outperform traditional stocks and
bonds over the long run, particularly amid somewhat
lackluster global growth rates of late.
That backdrop has helped ensure that pension funds
remained the mainstay of private equity over the past
year, as evidenced in our latest Sources of Capital
survey (Pensions Are Still LP Top Dogs, but Wealthy
Investors Gain Ground). However, family offices and
wealthy investors, as well as investors from areas of
Asia outside of Japan, also expanded their share of
the commitment pie.
Also in this month’s Sources of Capital issue,
Dawn Lim reports that some of the nation’s
smallest endowments are looking beyond the
Yale model as they carve their own paths into
private equity (Beyond Yale, Small Endowments
Embrace PE With Their Own Models), and
Hillary Canada covers the renewed caution
among LPs toward emerging markets private
equity (Amid Tepid Returns, LPs Approach
Emerging Markets Cautiously).
Stay tuned for our midyear fundraising issue next
month as well as coverage from this year’s Private
Equity Analyst conference.
As always, we welcome your feedback on how we
can improve our coverage.
Sincerely,
Laura Kreutzer
Assistant Managing Editor
Dow Jones Private Equity Analyst
Laura.Kreutzer@wsj.com
@LauraKreutzer
4
June 2015
news
Briefs
“This is a positive change.”
SEC: PE Improving Disclosure
– Marc Wyatt, acting director of the SEC’s Office of Compliance, Inspections and
Examinations, on moves by the private equity industry to review and change practices
on the disclosure of fees and expenses the regulator found questionable.
Private equity firms have improved their
disclosure of fees and expenses but
have more work to do to make sure
investors are getting all of the information
they need, a Securities and Exchange
Commission official said. Marc Wyatt,
the acting director of the SEC’s
Office of Compliance, Inspections
and Examinations, said at the Private
Fund Compliance Forum 2015 in New
York that private equity firms and their
investors are “more focused” on fees
and expenses, and that has prompted
the industry to review and often change
practices regulators have highlighted
as questionable. “This is a positive
change,” Mr. Wyatt said. He added
that there is “room for improvement”
in how firms allocate expenses and
manage co-investments, in which
fund investors such as pension funds
and sovereign wealth funds directly
participate in certain deals. Mr. Wyatt’s
comments come as private equity
firms come under increasing scrutiny
for their fee and expense practices.
Cobepa Starts U.S. Operations
Cobepa SA is the latest investment
firm to cross the pond to tackle the U.S.
private equity market. “The U.S. is by
far the biggest and most liquid private
equity market,” said Cobepa Managing
Director Jean-Marie Laurent Josi. “From
a medium- to long-term perspective,
we plan to manage on behalf of our
investors substantial assets in the U.S.
and have been progressively building
up a presence there.” The Brussels firm,
set up in 1957 and bought out by a
group of European family investors from
BNP Paribas SA in 2004, has until now
never made a U.S.-based investment.
It focuses on European investments,
though the firm said it has significant
economic interests in the U.S., Asia and
South America because of its portfolio
companies’ businesses. Mr. Laurent
Josi said the firm hired Peter Connolly,
a former principal and co-head of health
care at Summit Partners, in February as
a managing director to lead U.S. efforts.
The firm has also relocated Investment
Director Gilles Davignon to New York
as part of efforts to tap the U.S. market.
SEC Examining Blackstone Fees
Blackstone Group said the Securities
and Exchange Commission recently
requested information about some
of its fee practices, including its pre2014 collection of large one-time
fees when selling or taking public
companies it controlled. Blackstone
last year voluntarily curbed its collection
European Investors Submit to Looser Loan Terms
The level of debt issued by private equity-backed companies that offers little
protection to creditors has reached a new high, as firms take advantage of investors’
hunt for yield in a low-interest-rate environment.
Nearly half of European leveraged loans issued in the first quarter of this year, worth
a combined €5 billion, were covenant-lite, according to data provider S&P Capital
IQ LCD. This represents 43% of total institutional leveraged loan volume on the
continent, marking the highest quarterly proportion on record.
Deals without covenants used to be rare in Europe but have become increasingly
popular as the market evolves to compete with the high-yield bond and U.S.
leveraged loan markets.
“European institutional lenders were facing an existential crisis, given competition
from high-yield and Yankee [U.S.] issuance in 2012 and 2013,” said Graham Tufts,
head of leveraged and acquisition finance for Europe, the Middle East and Africa at
HSBC Holdings PLC,“and have gradually grown more accepting as they realize they
could lose opportunities to other capital markets.”
of such fees, often called monitoringtermination fees, which are charged
by many private equity firms but have
become controversial. The decision to
curb the fees by Blackstone represented
a significant U-turn in an industrywide
practice, and promised to save the firm’s
investors tens of millions of dollars. In its
most recent quarterly filing, Blackstone
said, “Recently, the SEC has informally
requested additional information
about our historical monitoring fee
termination practices.” Blackstone
said the SEC also has sought new
information about a different practice,
involving “the application of disparate
vendor discounts to Blackstone and
to our funds.” The filing didn’t explain
those further, but said the practice
was changed in 2011 and previously
was reviewed by the SEC in 2012.
The company said it is in “discussions
with the SEC regarding a potential
resolution of these matters.”
Apollo Appeases Debt Investors
Apollo Global Management is
embarking on an unusual campaign to
improve its image with debt investors
after a series of spats between the
private equity firm and creditors in
some of its troubled deals. Apollo
is preparing to meet with big debt
investors, including mutual-fund
managers, in several cities over the
next few months to ease concerns
the firm protects its investments in
troubled companies at the expense of
creditors, according to people familiar
with the matter. In the meetings, which
are slated to begin in May, Apollo will
try to persuade investors the debt
issued to fund its corporate buyouts
is a good investment, the people said.
The ongoing restructuring of casino
owner Caesars Entertainment Corp.,
which Apollo bought in 2008 with
fellow private equity firm TPG Capital,
angered creditors who felt burned by
the firm’s moves. Apollo plans to say
that, over time, bonds and loans backing
its leveraged buyouts have delivered
market-beating returns, the people said.
news
Pao Disputes $1M Bill
Ellen Pao is pushing back against
Kleiner Perkins Caufield & Byers’s
request that she pay nearly $1 million in
expenses for the venture capital firm’s
witnesses during her sex-discrimination
trial, saying the costs were “grossly
excessive and unreasonable.” Kleiner
Perkins asked Ms. Pao to pay the costs
April 22, nearly four weeks after it won
a jury verdict on her claims the firm
had discriminated against her in not
promoting her, and retaliated by later
firing her. The verdict followed a fiveweek trial in San Francisco Superior
Court that drew national attention. The
firm offered to waive the $972,814.50
in costs if Ms. Pao agrees not to appeal.
In a statement Friday, Ms. Pao called
that “an offer that had no value.” Ms. Pao
has until June 8 to appeal. A hearing on
Kleiner Perkins’s request for the costs
is scheduled for June 18. In a filing,
Ms. Pao’s attorney noted her legal fees
had climbed to more than $632,500 in
November – before the trial.
Alibaba Exec Aims to Invest
A top Alibaba Group Holding Ltd.
executive is forming a multibilliondollar family office to invest the wealth
created by the Chinese e-commerce
giant’s $25 billion New York initial public
offering, according to people familiar
with the situation. Joseph Tsai, Alibaba’s
June 2015
5
executive vice chairman, and other
early Alibaba executives are setting up
the office in Hong Kong with an eye
to opening this summer, according to
one of the people. Mr. Tsai controls a
roughly $6.5 billion stake in Alibaba,
based on the company’s prospectus.
With the company’s shares now publicly
traded and lockups expiring, he and the
other executives are looking to diversify
their wealth. The family office will be
co-managed by Oliver Weisberg, a
managing director in Citadel LLC’s Hong
Kong office, and Alexander West, the
founding partner of Blue Pool Capital
Ltd., a Hong Kong-based hedge fund
backed by Mr. Tsai, the person said.
Carlyle Plots Silicon Valley Return
Some six years after Carlyle Group
closed its Menlo Park, Calif., office, the
private equity firm intends to replant
its flag in Silicon Valley this fall. Carlyle
this month in PEA’s pages...
u 1 YEAR AGO
u 5 YEARS AGO
u 10 YEARS AGO
With the secondary market
starting to heat up last year,
more large portfolios of
private equity interests began
hitting the market. Ardian
scooped up a $1.3 billion
portfolio of private equity
stakes from General Electric
Co.’s GE Capital. The portfolio,
predominantly made up of
U.S. midmarket buyout funds,
included as many as 300
fund stakes, Private Equity
Analyst reported at the time,
citing two people familiar
with the matter. Meanwhile,
fund-of-funds manager
HarbourVest Partners was
shopping a portfolio of
private equity stakes valued
at around $500 million as it
sought to take advantage of
generous pricing conditions
in the secondary market.
The firm sold the portfolio in
early June 2014 to Goldman
Sachs Asset Management.
The passage of U.S. healthcare reform may be one of
the sparks that got nearly 40
private equity firms that invest
in the industry to form a trade
group to increase their visibility
in the sector. The Healthcare
Private Equity Association
was the first sector-focused
trade group within the private
equity industry, and its
founding members included
both midmarket and large
firms such as Apax Partners,
Frazier Healthcare Ventures,
Beecken Petty O’Keefe and
Co., Kohlberg Kravis Roberts
& Co., Linden LLC, Madison
Dearborn Partners and
Welsh Carson Anderson &
Stowe.“HCPEA will work to
demonstrate the attractiveness
of health-care private equity
to the investment community,
as generally health care has
been under-represented in
the private capital markets,”
said Brian Miller, the
association’s co-founder.
It was the era of club deals
and megafunds, and large
institutional investors were
starting to up the ante as
well, making supersize
commitments or taking steps
to do so. Over the preceding
eight months, California
Public Employees’ Retirement
System, Oregon State
Treasury and Washington
State Investment Board
each handed out individual
fund commitments of
$300 million or more. And
larger commitments were
on the horizon. Calpers
approved a proposal to allow
commitments of as large as
$800 million to “top quartile
funds” without prior board
approval, while the board
at California State Teachers’
Retirement System was set to
vote on a proposal to allow
staff to approve commitments
of as large as $500 million
to funds it backed previously
without board approval.
u HISTORICAL
DATA
LBO Fundraising
$80.03B
$21.15B
2014
2010
$26.20B
2005
VC Fundraising
$14.37B
2014
$5.86B
2010
$10.59B
2005
Based on multiple closings through
June 1 of the given year.
Source: Dow Jones LP Source
6
June 2015
opened its Menlo Park office in early
2008, but that December, in the depths
of the economic downturn, Carlyle said
it would shutter the office amid firmwide layoffs. “We feel it’s important to
have a presence on the West Coast to
deepen our network of relationships,”
said Pete Clare, Carlyle’s co-head
of U.S. buyouts. Carlyle hopes those
relationships will help it find companies
to invest in as well as executives to
run them. Patrick McCarter, a Carlyle
managing director currently based in
Washington, D.C., will lead the firm’s
Menlo Park office. Carlyle’s return to
Silicon Valley comes amid a slew of
buyout activity in the technology sector.
CCMP Gets Investor Vote
CCMP Capital Advisors won support
to resume investing from its latest
fund following the departure earlier
this year of Stephen Murray, the firm’s
former president and chief executive
who died in March, said people with
knowledge of the matter. Mr. Murray’s
departure triggered a key-man clause
for the $3.6 billion fund, CCMP Capital
Investors III LP, which the firm finished
raising last year. Mr. Murray died after
he left CCMP and following a leave of
absence, said a person familiar with the
matter. CCMP has updated the list of
key persons for its latest fund. Douglas
Cahill, an operating partner, has
news
become a key man, while Joe Delgado,
a member of the energy and industrial
team, has been removed from the slate.
The firm opened discussions with
investors in CCMP Capital Investors III
to alleviate concerns when Mr. Murray’s
departure from the firm was imminent,
said two people with knowledge of
the situation. Promised new investor
protections, the limited partners
supported a reinstatement of the fund’s
investment period, providing the firm a
vote of confidence as it looks to name a
permanent chief executive.
and in 2016. “It is less competitive in the
lower end of the market,” he added. The
co-founders’ previous firm, NGP, has
formed a “long-term strategic investment
relationship” with Citrine, and will make
capital available for “investment from
time to time directly in the future portfolio
companies of Citrine,” the firms said
in a release at the time. Mr. Goodman
declined to elaborate on the relationship
with Irving, Texas-based NGP or comment on Citrine’s capital raising plans.
Energy Firm Targets Small Deals
A group of former TowerBrook
Capital Partners executives are in
talks with investors about raising
capital for their newly established
firm, Freshstream Capital Partners.
Rayhan Davis, Adam McClain and
Patrick Smulders, all former managing
directors at TowerBrook, left earlier
this year and are in early-stage talks
with investors to raise capital for their
first private equity vehicle targeting
proprietary investments in western
European companies, particularly those
in the U.K. and the Benelux region.
Mr. Davis served as a deal maker at
TowerBrook and was also responsible
for debt financing across the firm’s
European portfolio. Mr. McClain was
TowerBrook’s European general
counsel. Mr. Smulders served on the
investment committee of TowerBrook
and before that was part of the
founding team at Doughty Hanson.
Three former principals of Natural Gas
Partners have launched Citrine Energy
Capital Management, which will focus
on smaller transactions in the energy
space. “We saw an opportunity, particularly in the lower end of the middle
market, which we define as sub-$75 million equity checks,” said Daniel Goodman, a co-founder and partner of Citrine.
“We believe now is an attractive time
to invest in small and midcap oil and
gas [companies],” said Mr. Goodman.
Citrine, with offices in Dallas and Houston, targets investments of $25 million
to $75 million of equity in the North
American upstream, midstream and
oilfield services sectors. Mr. Goodman
said the firm’s principals expect to see
more energy asset sales later this year
Blackstone Gives Moms More Time Off
Blackstone Group said that it is
extending its maternity leave benefits
to 16 weeks at full pay from 12 weeks.
The move, announced in a memo to
employees, is designed in part to help
the company compete for talented
Wall Street women.
“The financial services industry has
historically struggled to attract and
retain women,” Chief Executive Stephen
Schwarzman said in the memorandum
reviewed by Private Equity Analyst sister publication The Wall Street Journal. “By having
strong policies in place that support working mothers…we hope to help make asset
management a more attractive industry for women.”
The cost of the extended maternity leave will be pocket change for Blackstone, which
has been positioning itself as a top career destination for the best and brightest, akin
to Apple Inc. and Google Inc.
“With leadership comes the responsibility to set the bar a little higher. I hope
everyone follows,” said Blackstone President Hamilton “Tony” James.
TowerBrook Vets Form New Firm
Pentagon Enters Silicon Valley
The U.S. Department of Defense plans
to open its first office in Silicon Valley
and provide venture capital in an effort
to tap commercial technology that can
be used to develop more advanced
weapons and intelligence systems.
Pentagon officials said the twin moves
are part of the department’s broader
effort to field technology more quickly
and cheaply amid concerns potential
adversaries such as China are closing
the gap or surpassing U.S. capabilities.
However, the Pentagon’s push faces
resistance from technology companies
and the venture capital community,
which has long been wary of becoming
ensnared in the department’s
bureaucracy and uncertain budget
outlook. The Pentagon’s planned
office in Moffett Field is expected to
April 2015
$10,100,000,000
Lexington Capital Partners VIII, L.P.
THIS PARTNERSHIP HAS BEEN ESTABLISHED TO ACQUIRE
A DIVERSIFIED PORTFOLIO OF PRIVATE EQUITY AND ALTERNATIVE INTERESTS
IN THE GLOBAL SECONDARY MARKET.
New York 660 Madison Avenue, New York, NY 10065 212 754 0411
Boston 111 Huntington Avenue, Suite 3020, Boston, MA 02199 617 247 7010
Menlo Park 3000 Sand Hill Road, 1-220, Menlo Park, CA 94025 650 561 9600
London 50 Berkeley Street, London W1J 8HA 44 20 7399 3940
Hong Kong 15/F York House, The Landmark, 15 Queen's Road Central, Central, Hong Kong 852 3987 1600
info@lexpartners.com
www.lexingtonpartners.com
8
June 2015
have around 15 staffers drawn from
active-duty military and reservists. The
department plans to use In-Q-Tel, a
venture capital firm set up by the U.S.
intelligence agencies in 1999, as the
conduit. It will provide a small amount
of seed capital during a one-year pilot
program with the firm.
Alaska Fund Calls for Boost
Aiming to build out its private equity
portfolio, the Alaska Retirement
Management Board has proposed
raising annual commitments to the
asset class gradually in the next
decade, with plans to pledge $499
million in 2015, $502 million in 2016
and $507 million in 2017. Private
equity investments as of Dec. 31 made
up 7.8% of a $22.63 billion portfolio
the board has been overseeing, short
of a 9% goal, according to investment
documents released in advance of a
meeting in late April. The pension fund
is expected to have 10% of its portfolio
in private equity by 2024, according to
a proposed pacing plan. To get closer
news
to that goal, the Alaska Retirement
Management Board is calling for a
“measured increase in commitment
pacing” over the decade, and targeting
$517 million in commitments in 2019
– the halfway mark for the 10-year plan
– and $542 million in 2024, according
to the documents. The pension fund
committed $593.8 million to private
equity in 2014, exceeding a $450
million commitment target. It decided
to go beyond its allocation target to get
into new special situations funds in the
market, according to documents.
Foundation Becomes Flare
Software and big-data technologies
are upending the country’s system of
delivering health care, and venture firm
Foundation Medical Partners wants
to be in the middle of the fray. So the
firm will cease investing in medical
devices and therapeutics, and will focus
exclusively on health-care software and
services as it relaunches with the name
Flare Capital Partners. The rebranded
firm sets out with a new, $200 million
fund, Flare Capital Partners I LP, which
is the same size as the firm’s three
previous funds combined, General
Partner Michael Greeley said. He added
that a source of confusion about the
firm could be traced to other firms and
companies using the word “foundation”
in their titles, including Silicon Valleybased Foundation Capital. “Also,” Mr.
Greeley said, “we’re not really medical
anymore. This fund is dedicated to
Big Appetites for Small Stakes
In a market where valuations are high and private equity firms are facing increased
competition from strategic buyers for deals, getting access to deals through minority
stakes can be fruitful.
The value of minority stakes in the European private equity market increased
substantially last year. According to data provider Dealogic Ltd., the total value of
minority investments more than doubled to $11.93 billion across 296 deals last
year, from $5.94 billion across 291 deals in 2013. It was the highest annual total
since minority investments stood at $19.99 billion across 330 deals in 2008. The
figures are based on stakes of 45% or less.
“Everyone would love to do 100% buyouts, but the market is such that sellers aren’t
putting enough of those assets on the market,” said Marco Compagnoni, a partner at
law firm Weil Gotshal & Manges LLP.
One of the biggest benefits of minority deals is they give private equity firms the
opportunity to invest in businesses unavailable in the market, often because the
management is reluctant to concede control.
the infrastructure of health care. It’s
considered the largest dedicated
health-care [information] technology
fund.” The size of the new fund, as well
as the composition of limited partners
who invested in it, show that health-care
information technology, which some
firms refer to as “digital health,” has
indeed become a white-hot sector.
Ohio LP Withdraws Commitment
The Ohio Police & Fire Pension Fund
withdrew a $40 million commitment
to Black Diamond Capital
Management’s latest $1 billion fund
offering, amid growing doubts from
investors on whether the distressedfor-control market is deep enough
to generate attractive returns for all
the firms jostling to raise money. The
pension fund won’t follow through with
an earlier pledge to BDCM Opportunity
Fund IV LP “after further evaluation of
the midsize distressed debt market,”
said David Graham, a spokesman
for the $14.9 billion pension fund. It
has also decided “not make any new
commitments to the space at this
time,” he said. The Columbus, Ohio,
pension fund didn’t elaborate on its
about-face, and a spokesman for
Black Diamond declined to comment.
The firm, which aims to gain control
of companies through the purchase
and restructuring of debt, is said to
have amassed $600 million to $650
million for Opportunity Fund IV so far,
said a person familiar with the matter.
S.C. Raises Pacing Targets
The South Carolina Retirement
Systems plans to make about $750
million in commitments to private equity
in the year starting in July and signaled
it is interested in energy strategies and
smaller managers. The pension system
targeted private equity commitments
of roughly $150 million to $450 million
in the previous year, a time when many
limited partners received record cash
distributions and had more capital to
put to work. As it looks to deploy funds,
the $29.51 billion pension fund investor
intends to investigate ways to profit
from the selloff in the energy markets,
according to a draft annual investment
plan the South Carolina Retirement
System Investment Commission
approved in late April. “The recent drop
news
June 2015
9
best of our blogs
Jennifer Lopez Tells Venture Capital
Conference How to Create a Brand
Venture Capital Dispatch, May 6
Singer, dancer, actress, philanthropist and now entrepreneur
Jennifer Lopez appeared before the National Venture Capital
Association to reveal the secrets of her business success.
With 100 million followers on social media, a hit movie and
partnerships with Kohl’s Corp., Verizon Wireless and several other
global brands, the svelte
45-year-old said she
has gotten as far as she
has by working “really,
really hard,” taking risks,
surrounding herself with
partners who have skills
that she lacks and never
forgetting who she is.
“I’ll always be Jenny from
the block, and I love that,”
she said, adding that
she grew up in modest
circumstances in the
Bronx and started singing
and dancing just so she
could make herself proud.
As a woman and a mom and a Latina, she said,“I inspire and
empower them to do it as well. I have done it, and if you work
hard, you can do it as well. That’s part of who I am and my brand.”
Successful brands need to be authentic, said Ms. Lopez,
who described how she and her team constantly challenge
themselves to create something of quality that will make a
difference in the marketplace.
Her partnership with Kohl’s, for instance, arose because “as a Puerto
Rican girl from the Bronx who really had no money, I wanted fashion
and style at an amazing price, and now I have the opportunity…to
give fashion and style at a price that’s attainable, that’s authentic.
People get that. It works, and that’s how you create a multimilliondollar brand.”
People who represent brands have to understand why they
attract followers, she said. After her first movie, Mi Familia,
people associated her with Latinos and families, she said, and
after her first hit song they associated her with love.
“These things start becoming your brand, and if you can stay
in that lane and understand that – I’m an artist, and art and
business is the same. You stay with what is real to you,” Ms.
Lopez said.“It’s about knowing who you are.”
Successful brands also convey emotion, she added, like the
association that State Farm creates between insurance and
good neighbors. For a partnership she has with BodyLab, which
makes weight-loss products for women, the hashtag on Twitter is
#bethegirlofyourdreams.
Next up for Ms. Lopez is developing her partnership with NuvoTV,
the English-language cable network for U.S. Latinos in which she
has a stake. NuvoTV is backed by Rho Ventures, and Ms. Lopez
said she is working with Rho Managing Partner Mark Leschly to
help her figure out how to create a billion-dollar company.
“I bring a different spark…than what they have when I
walk into a room of business people, but you need both the
creative and the business side,” she said. “So over the next
10 to 20 years, we’re going to build something that’s never
been done before.”
SEC’s Rozenblit Urges Private Equity
to Follow the Golden Rule
Private Equity Beat, May 13
Private equity firms that wish to stay on the good side of
the Securities and Exchange Commission should follow
one simple rule, according to one of the men charged with
examining the industry.
Igor Rozenblit, co-head of the private funds unit of the SEC‘s
Office of Compliance Inspections and Examinations, said the
regulator’s primary concern has been protecting the rights of the
investors who back private equity funds.
“Do unto others as you’d have them do unto you,” Mr. Rozenblit
told attendees at a private equity conference hosted in
Washington by the International Finance Corp. and the Emerging
Markets Private Equity Association.
Moreover, private equity fund managers should avoid another
version of the “golden rule,” which Mr. Rozenblit said he later
heard in business school:“He who has the gold makes the rules.”
“I would urge you not to follow that principle,” he added.
The regulator is taking a closer look at the industry and pushing
for better governance and transparency in the hope that PE firms
will move toward resolving disconnects with investors, said Mr.
Rozenblit, who added that the views he shared were his own
and not that of the SEC.
“We hope you go and fix it yourself,” said Mr. Rozenblit,
encouraging more self-regulation in the industry.
“Sometimes fund managers have this idea that if all competitors
engage in a practice, they can as well, because investors must
know about it,” he said, pointing to so-called monitoring fees as
an example of such a practice.
A number of firms have migrated away from that practice or
started sharing the proceeds with investors.
“There were a few [limited partners] that knew about it, but they
were mainly the ones that were doing co-invest[ments],” Mr.
Rozenblit said, adding that firms should clarify their processes
early in a fund’s formation.
“If there’s something going on in your fund complex, investors
should know about it,” he said.
10 Private Equity Analyst
June 2015
news
VC Trade Group Steps Up Diversity Push
The National Venture Capital Association, which has been pushing to get venture
capital firms and their portfolio companies to hire more diverse workforces, has
found several new ways to attack the problem.
“I know we have a long way to go, but everyone gets it,” said ScaleVP General Partner
Kate Mitchell, who is co-chairing a task force on diversity the NVCA launched in December.
By diversity, the trade group means not just women, but also minorities, veterans,
people with disabilities, and lesbian, gay and transgender people. All of these groups
are underrepresented in venture firms and in startups.
Diversity has become a painful topic in the tech industry, with surveys showing that the
percentage of females at venture firms are in the single digits and that female and ethnicminority entrepreneurs are significantly less likely to raise venture capital than white males.
As the NVCA task force has looked at diversity in the venture capital sector, ideas it has
come up with so far include the creation of “affinity networks” across venture firms so that
women could talk to women in other firms if there was no one to talk to in their own firms.
Also being considered are the insertion of language into term sheets, the legal
documents companies use when they raise money, to encourage hiring a diverse
workforce, and to have venture firms hire diverse interns.
in prices could present an interesting
opportunity for managers to benefit from
this market dislocation,” according to
that investment blueprint. Private equity
made up 8.9% of the systems’ portfolio
as of Feb. 28, down from 9.2% as of
June 30, 2014. South Carolina has a
9% target allocation to private equity.
The Columbia, S.C., pension fund has
stressed the need for caution as it dials
up pacing targets, especially as investors
are running into heavy competition
to get into the most favored funds.
1776 Buys The Hattery
The Washington startup incubator and
seed fund 1776 is expanding to San
Francisco through the acquisition of
startup studio The Hattery in a cash
and stock deal, according to 1776
co-founder Evan Burfield. Mr. Burfield
declined to disclose a price. He said
the deal was structured to “align the
Hattery team with ours around longterm success” for the quickly-expanding
incubator, seed fund and the startups it
helps. As part of the deal, The Hattery’s
co-founders Josh Mendelsohn, Joshua
To and Luis Arbulu will be joining
1776 as strategic advisers. With the
acquisition of The Hattery, 1776 reports
that it has 1,200 startups in its global
network; 38 full-time employees who
help them day to day and keep the
1776 co-working spaces and events
running; 650 outside mentors; and
45 corporate partners. The Hattery
will continue to operate under its own
brand name in San Francisco. Tactically,
1776 companies will be able to work at
offices in The Hattery and with design
and user experience experts there when
they spend time in San Francisco,
fundraising, recruiting or expanding their
businesses there.
CUNY Gets Green Light
The City University of New York’s
endowment got the green light to
invest in private equity for the first time,
after trustees approved a 10% target
allocation to the asset class out of
the university’s $250 million portfolio.
CUNY’s endowment hasn’t previously
invested in private equity, said two
people familiar with the matter. As a
smaller entrant to the market, CUNY is
likely to find it harder getting access to
the most favored private equity funds
compared with larger endowments,
one of these people said, adding that
the public university will build up its
exposure gradually and not force its
investment pace. The university began
deliberating changes to its portfolio mix
earlier this year, this person said. The
move into private equity is part of efforts
by CUNY to diversify its investment
portfolio and grow the endowment.
Cambridge Associates, the investment
consultant that assisted with CUNY’s
portfolio review, will make private equity
fund recommendations to the trustees
at future meetings, this person said.
Liquidnet Offers Pre-IPO Access
The runway to initial public offerings
could grow even longer if Liquidnet
Inc. executes on its plan. Liquidnet,
a 14-year-old operator of so-called
dark pools for trading stocks, is
attempting to create a market for
buying and selling pre-IPO companies.
The pre-IPO time frame has already
been extended for the Ubers, Warby
Parkers and dozens of other so-called
technology unicorns, but Seth Merrin,
the founder and CEO of Liquidnet, said
he expects to expand even wider the
pool of buyers of capital and companies
who sell those shares. Roughly 150
of the 800 institutional investors that
trade in his dark pool have said they
would weigh investments in late-stage
private companies, Mr. Merrin said.
While Fidelity Investments, Wellington
Management Co. and T. Rowe
Price Associates have been active
participants in this market, Mr. Merrin
said many of his clients have never
done a private deal. Liquidnet will seek
to do this by conducting something
of a scaled-back roadshow so their
investors can see a private company’s
financials. Mr. Merrin said companies
will be able to choose their investor
base, and his clients – the institutional
investors – can have a simplified way to
look at potential investing opportunities.
For this, Liquidnet will charge a fee
ranging from 2% to 6% of the size of
the fund raised.
Flagship Signs Partnerships
Flagship Ventures, which is ramping
up its company-creation efforts through
a new, $537 million fund, has teamed
up with three corporations that could
be helpful to the firm as it creates
biotechnology, nutrition and agriculture
startups. Flagship, which invests in
health care and sustainability, creates
a number of its portfolio companies
through its Flagship VentureLabs
group. The firm has teamed up with
AstraZeneca PLC, Nestlé Health
Science and Bayer CropScience
to gain insights from executives and
research and development officials
news
when it is in the early stages of forming
companies. Through these partnerships,
all three corporations have invested
in Flagship’s new fund, its fifth, which
closed in March. The collaborations add
to an existing relationship with Merck &
Co. Flagship’s corporate partners don’t
have any rights to invest directly in the
firm’s portfolio companies or to strike
deals with them, but they do get a close
look at the Flagship’s company-building
process and an opportunity to offer
guidance to the firm.
VCs Support Box Platform
Two Silicon Valley venture capital firms,
Bessemer Venture Partners and
Emergence Capital, have committed up to $20 million each to invest in
companies that are leveraging technology from cloud-storage company Box
Inc. Both firms previously invested in
Box, the users of which store and share
files in the cloud. Box, which has been
trying to create an ecosystem of Box
apps, announced new technology that
makes it easier for developers to create
applications that run on Box and can be
accessed with either desktop or mobile
devices. Several companies announced
integrations with Box, including the
iPhone app Tipbit, which lets users save
attachments or emails directly in Box,
and K2, which lets users build applications that include forms and workflows
from within Box. Box went public in
January and has a market cap of about
$2.15 billion, down from about $2.7 billion after the company’s first day of trading on the New York Stock Exchange.
Schwarzman Gives to Yale
Yale University announced a $150
million gift from Blackstone Group cofounder, Chairman and Chief Executive
Stephen Schwarzman to establish a
new center for cultural programming
and student life. This is the secondlargest gift in Yale’s history and among
the biggest that any university has
received this year. “My hope is that
the Schwarzman Center will serve as
the crossroads for the campus, but
also place Yale at the crossroads of
the world,” Mr. Schwarzman, a Yale
alumnus himself, said in a statement
released by the school. The center is
expected to open in 2020 and will help
accommodate the Ivy League school’s
Private Equity Analyst 11
June 2015
growing enrollment as the school
adds two new residential colleges.
LPs Can Exit Gun Maker Stakes
Cerberus Capital Management told
its investors that it has created an
avenue for them to sell their stakes in
a gun maker the private equity firm has
been under pressure to divest from
since the Sandy Hook school shooting
in 2012. Cerberus sent a letter to its
investors, which include pension funds
and endowments, telling them that it has
separated Remington Outdoor Co., the
maker of Remington and Bushmaster
rifles formerly known as Freedom Group
Inc., from its funds and will allow any
investor wishing to cash out of the
company to do so, according to a person
familiar with the letter. Remington will
use the proceeds from a 2013 debt sale
to pay investors who choose to divest
their stakes, the person said. Cerberus
said in the letter that the company’s
value, including debt, was about $880
million, the person said. The New York
Times reported earlier on Cerberus’s
letter to its investors. Cerberus tried
to sell the company at the urging of
its investors, including the California
State Teachers’ Retirement System,
after a Bushmaster rifle was used by
Adam Lanza to kill 20 children, six staff
members and himself at the Sandy Hook
Elementary School in Newtown, Conn. n
Send press releases to VWEditor@
DowJones.com
June 2015
news
Comings & Goings
uCarlyle Group is becoming
both a destination and a jumping-off
point for executives coming from
and going to large corporations. The
private equity giant has brought on
Mike Duke, the former chief executive
of Wal-Mart Stores Inc., and José
E. Almeida, former chief executive
of medical supplies maker Covidien
PLC, as operating executives.
Meanwhile, Michael J. Cavanagh,
who left J.P. Morgan Chase &
Co. for Carlyle last year, is joining
Comcast Corp. as chief financial
officer after less than a year as copresident and co-chief operating
officer at the private equity giant,
and Carlyle Managing Director
David A. Heilbrunn is joining Fifth
Street Asset Management Inc. as a
managing director.
uLevine Leichtman Capital Partners has added two
managing directors. John O’Neill, a former partner at Graphite
Capital, will oversee the firm’s London office and lead its efforts
in seeking investment opportunities throughout the U.K. and
Ireland. Robert Hays, who was director of investor relations at
H.I.G. Capital, will serve as co-head of investor relations.
uRally Ventures brought on Art Coviello, the former
executive chairman of EMC Corp.’s RSA security division, as
a venture partner to expand the firm’s portfolio of enterprise
security companies. He has been a member of Rally’s Tech
Partners program since the firm was founded in 2013.
José E. Almeida
uStuart Bernstein, global head
of the venture capital as well as the
Michael J. Cavanagh
clean-technology and renewables
units at Goldman Sachs Group Inc., is leaving the firm. A
Goldman Sachs spokesman declined to discuss reasons
for Mr. Bernstein’s departure. Christopher Buddin will step
in to lead the clean-tech group, and Ken Hirsch will take on
the venture capital role after Mr. Bernstein departs.
uSeeking to help its portfolio
companies better navigate legal
gray areas, Andreessen Horowitz
has hired former Facebook Inc.
General Counsel Ted Ullyot to the
newly created position of partner of
group policy and regulatory affairs.
By adding Mr. Ullyot, the firm said,
it aims to create a series of ongoing
discussions with policy makers to
educate them about the various
technologies being created.
Ted Ullyot
uMeanwhile, TPG Capital’s general counsel, Ronald
Cami, is leaving the firm after five years as its top in-house
lawyer. Mr. Cami has agreed to stay on at the firm while it
searches for a replacement and to help with the transition.
“I made the decision that I wanted to pursue new opportunities
that I’ve been approached about and I am looking forward
to new challenges,” Mr. Cami said in an email. Mr. Cami
hasn’t disclosed further details about his plans.
uSaguna Malhotra, Stanford Management Co.’s
managing director of private equity, will join Adams Street
Partners as a partner and member of its investment team.
At Stanford Management, Ms. Malhotra was responsible for
managing Stanford University’s private equity portfolio.
uFive staff members have left or are leaving Change
Capital Partners this year, after its ambitions to raise a new
fund stalled last fall. Among them are Chief Financial Officer
Andrew Wood, who left in January, according to a filing with
Companies House. Emma Fava, Change’s former head of
investor relations, left this year, according to a person familiar
with the matter. Marco Sebold, a former managing director, is
due to leave in May.
uVC ROUNDUP: MPM Capital
hired Gregory Sieczkiewicz, a
lawyer with expertise in intellectual
property, away from Flagship
Ventures as a managing director…
Obvious Ventures added energyindustry executive Andrew Beebe
as a managing director to focus on
clean-tech and renewable-energy
startups…Jeff Rowbottom, a
Kohlberg Kravis Roberts & Co.
executive who heads capital markets
Gregory Sieczkiewicz
for North America, is leaving the
firm for health care-focused venture firm Pontifax Group…
Kevin Thau, a former Twitter Inc. executive who was chief
operating officer at search startup Jelly Industries Inc., joined
Spark Capital as a general partner…Ganapathy “Gani”
Subramaniam, former chief executive of Cosmic Circuits Pvt.
Ltd., joined Walden International as a venture partner.
uLBO ROUNDUP: Golub Capital hired Chip Cushman,
most recently a managing director at GE Antares, as
a managing director in its midmarket lending group…
BlueMountain Capital hired Tripp Lane, a senior deal
maker at Apax Partners, to push into European distressed
debt investments…Gregg Kaplan, founder and former CEO
of Redbox Automated Retail LLC, joined Pritzker Group
Private Capital as an operating partner for its services
team…Harjinder Johal, Darwin Private Equity’s head of
fundraising and investor relations, has left the firm, according
to public filings…Joe Rodgers, a former managing director
at KPMG Corporate Finance LLC, joined Monroe Capital
as a managing director heading the firm’s southeast region
group…Inflexion Private Equity hired Carl Wormald,
formerly a director at LDC, as a partner in its Manchester,
England, office to focus on investment opportunities in
the region…Frazier Healthcare said Chris Karkenny, an
executive with Apria Healthcare Group Inc., joined the firm’s
growth buyout team as an operating partner. n
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analysis
June 2015
Beyond Yale: Small Endowments
Embrace PE With Their Own Models
Managers of some of the smallest university endowments are embracing private equity as they seek
higher returns amid an environment of low interest rates and slow growth. But rather than mimic
portfolio management models popularized by some of the nation’s largest endowments, most notably
Yale University, some of these smaller players prefer to carve their own path to private equity.
By DAWN LIM
Christian
Two decades ago, Abilene
University took a
page from the playbook of wealthier colleges and introduced
private equity into its $75 million endowment.
The Texas private university now oversees a $376 million
endowment, 72% of which is invested in alternatives, an
asset allocation more commonly associated with much
larger endowments and those in the Ivy League. The
university generated 11% annual net gains in the 10 years
ended June 30 of last year, matching Yale University’s,
beating Harvard University’s and surpassing the average
7.1% returns of North American endowments over the same
period that was captured by the National Association of
College and University Business Officers and Commonfund.
“I hear a lot of different definitions on what is the
endowment model. If you look at it as a highly diversified
portfolio across nontraditional and traditional assets, then
we embrace that,” said Jack Rich, the chief investment
officer at Acimco, the investment company set up to run the
U.S. Endowments Drawn to VC, Buyouts,
Funds of Funds
Percentage of Endowments Interested in Strategy
80%
Abilene Christian University’s endowment has invested
about 20% of its portfolio in private equity – including
buyouts, credit and venture capital – another 10% in private
energy funds and an additional 10% in direct energy assets.
Creating their own twists on the investment models of
their large Ivy League peers, particularly Yale, smaller
players like Abilene Christian University increasingly are
hewing their own paths into private equity and other
alternative assets. Along the way, some are proving they
don’t have to be a large endowment with an elite in-house
investment team to build a deep private equity footprint
and score comparable returns.
The private equity push by smaller players comes with its
share of risk and particular challenges. Smaller endowments
are more likely to be disadvantaged than private equity
investors over $1 billion in size. They often have fewer
resources to support the staffing needed to thoroughly
perform due diligence on funds, as well as to meet reporting
and auditing demands. As a result, they often must rely on
funds of funds and advisers for access to the asset class,
which adds an extra layer of fees. If they are taking a more
hands-on role, they also may be writing larger check sizes
to build clout with managers, which may make them more
vulnerable if a fund falters.
Swensen’s Endowment Model
74%
64%
58%
60
50%
44%
40
36%
22%
20
21%
th
Na
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so ra
ur l
ce
s
Se
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ies
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zz
an
ine
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ow
Bu
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ut
Fu
n
Fu ds
nd of
s
Di
str
es
se
d
0
V
Ca entu
pit re
al
endowment. “I’m quick to say we’re not trying to be Yale,
Harvard or Notre Dame,” he added.
As of May 18. Dataset comprised 492 U.S.-based institutions. Source: Preqin Ltd.
Their approach to building private equity portfolios can differ
from portfolio management theories popularized by David
Swensen, Yale University’s chief investment officer, whose
ideas have come to be known as the endowment model, or
the Yale model. He advocated a diversified portfolio with a
higher proportion of illiquid assets – but only for those with
superior access and the resources to choose investments.
The endowment model came under criticism during the
economic downturn that began in 2007, when a series
of larger institutions were hit by illiquidity issues after exit
markets froze. The realization that private equity returns will
likely underwhelm if one lacks top-quartile managers also
prompted some endowments to reevaluate their private
equity exposure.
analysis
“The combination of the illiquidity and the uncertainty of
the return profile means the picture is not as clear as it
once was,” said William Jarvis, managing director of the
Commonfund Institute. “Organizations are continuing to
try to assimilate the full meaning of what the endowment
model requires.”
Although it expects to deploy more capital directly going
forward, Abilene Christian University has tapped funds of
funds in areas where it has found access more challenging,
such as venture capital. Swensen’s teachings stress the
importance of active management and warn of the risks
of tapping funds of funds. Mr. Rich – even as he runs
a portfolio he sees as more concentrated by managers
than bigger peers – believes asset allocation, rather than
manager selection, is the primary driver of returns for
Abilene Christian University.
A Small Endowment PE Push
Successful stories from endowments like Abilene Christian
University have encouraged other small endowments to
continue to tweak the Yale model to suit their goals, even
June 2015
if doing so means paying additional costs associated with
funds of funds or advisers. In a low-interest rate and lowgrowth environment, they may have few other choices.
Institutions with between $25 million and $100 million in
endowment assets grew out their private equity allocations
in the past year, according to data on the dollar-weighted
average allocations of North American higher educational
institutions from Nacubo and Commonfund.
Private equity allocations for institutions in that group
increased by a modest one percentage point to 3% in the
year ended June 30, 2014. In contrast, larger players’ private
equity allocations fell, thanks to a large volume of cash from
portfolio company exits that flowed back into their portfolios.
“The question of whether private equity is relevant for
smaller players is coming up again in the endowment
community,” said Ken Redd, Nacubo’s director of research
and policy analysis. “There is a sense that the economy
has gotten better, leading people to think that if you have
a good general partner, you can find the next Google and
Facebook in its infancy.”
analysis
June 2015
The University of Maine System, which runs a $264.4
million endowment and trust pool, decided in 2014
to build out a new 2% private equity allocation. Its
portfolio had no allocation to private equity at the end
of 2013. NEPC, the investment consultant, said private
equity would provide the system “potential for higher
returns compared to traditional domestic equity” when
it recommended the move. The system is growing the
portfolio by committing capital to Landmark Partners, in a
move that will help it plug gaps in vintage years.
The City University of New York got the green light this
year to invest in private equity for the first time and ramp
up its hedge fund investments, moves designed to diversify
the portfolio’s asset allocation and grow the endowment. A
smaller entrant to the market with $250 million in assets,
CUNY is likely to find it harder getting access to the most
favored private equity funds and will lean on its consultant,
Cambridge Associates LLC, for recommendations on which
firms to invest with, said a person familiar with the matter.
Yale’s Mr. Swensen long criticized the use of consultants
and fund of funds to access private equity, questioning
whether the profit motives of these entities were aligned
with those of their limited partners and whether they have
sufficient access to the best managers. But as the market
gets increasingly crowded and access to good managers
tightens, more endowments may find that they need fundof-fund managers and other intermediaries, with their
access to a stable of managers.
“To presuppose that it’s possible to select underlying
funds directly in some way that overcame 85 to 100 basis
points of fees of a fund of funds, that’s hard to do at $250
million,” said Travis Pruit, the U.S. business leader for notfor-profit outsourced chief investment officer services at
consulting firm Mercer LLC.
Small Endowments Want In on Private Equity
Average Allocations to Private Equity for North American Endowments,
for the Year Ended June 30 of the Given Year
15%
>$1B
12%
8%
$501M$1B
7%
6%
$101M$500M
5%
$51M$100M
2%
$25M$50M
2%
3%
2013
3%
The pain of being smaller became palpable for the Ball
State University Foundation in 2008 and 2009, when it
wanted to take advantage of dislocations in the aftermath
of the economic downturn but lacked the resources and
confidence to jump on opportunities when they were most
cheaply priced.
“As the market was going through a dislocation, there
were opportunities we couldn’t take advantage of,” said
Tom Heck, chief investment officer for Ball State University
Foundation’s $200 million endowment. “If we were a large
endowment with internal staff, we’d have been able to
be lot more nimble.” The university didn’t need to dip into
the endowment to fund operations or sell its fund stakes,
putting it in a slightly better position than others.
Ball State University, which in 2011 hired Perella
Weinberg Partners as a discretionary consultant for the
endowment, invests in private equity through commingled
vehicles managed by the firm. Its endowment portfolio is
about 50% allocated to alternatives, with 30% invested in
private assets. It targets roughly 8.5% in annualized returns
toward its objective of meeting a 4.5% spending rate.
“We believe in the endowment style of investing as one
that embraces wide diversification and an acceptance of
illiquidity,” Mr. Heck said, later adding, “I think it’s possible
for a smaller institution to participate in the same private
equity portfolio as a large endowment if they can find the
right channel.”
Mr. Heck said the additional layer of fees is justified as it
is still less than what it would cost the school to build an
endowment portfolio on its own. Passive investing is not
necessarily an easier option, he added, because institutions
that seek to tactically pick segments of the exchange-traded
funds market are still required to make “active and ongoing”
decisions.
As advisers and consultants continue to provide the
smallest endowments with access to private equity, the
asset class continues to gain mainstream acceptance.
“It will be interesting to see over time whether aggregate
investment capital from smaller players through outsourced
CIOs, funds of funds and consultants will impact the
environment for large endowments and dilute the
opportunity set,” said Mr. Heck.
If that happens, it could test how committed these small
endowments are to the investment models they have
adopted.
3%
0%
Resource Crunch
6%
9%
2014
Data is dollar-weighted. Source: NACUBO-Commonfund Study of Endowments
12%
15%
“If the amount of capital flooding into private equity results
in disappointing returns because entry prices are being bid
up, then institutions who didn’t understand the asset class
may decide to leave,” said Mr. Heck. “The institutions who
have the long-term horizon and more disciplined approach
will remain and benefit.” n
analysis
June 2015
Pensions Are Still LP Top Dogs,
but Wealthy Investors Gain Ground
By LAURA KREUTZER
public ones,
Pension plans, particularly
remain the biggest
source of capital for private equity firms in fundraising mode,
even as shifting demographics put increased pressure on
defined benefit schemes.
That is just one of several takeaways from the latest edition
of the Dow Jones Private Equity Analyst Sources of Capital,
an annual survey of placement agents and general partners
that measures where capital came from for the prior year’s
commitments.
The capital accounted for in this year’s survey sample –
about $32.42 billion – fell short of prior years, partly due to a
lack of participation by many of the largest buyout firms. That
makes the results more heavily weighted to subasset classes,
such as secondary funds, infrastructure funds and private
debt. The smaller survey sample could allow a small group of
outliers to have a bigger influence on the data results.
That said, our analysis focuses on data points with the
strongest sample sizes and where we felt confident the
data illustrates broader trends in the market.
Investors eagerly deployed capital back into private equity
funds in 2014, thanks to a steady flow of distributions
in 2013 and 2014. U.S. private equity fundraising hit
$266.2 billion in 2014, a roughly 12% increase over 2013,
according to Dow Jones LP Source, a data provider also
owned by Dow Jones. Public pension funds, long the
mainstay of private equity fundraising, maintained a steady
flow of commitments or, in some cases, even increased
their commitment pace in 2014 to keep up with the cash
they were receiving back from their GPs.
Not surprisingly, public pensions accounted for about 31%
of the capital raised by firms in this year’s survey sample,
roughly on par with last year’s survey and still the largest
Breakdown of Fund Types
Total Capital Raised: $32.42 Billion
1% 1%
Infrastructure
Secondary funds
4% 3%
7%
28%
8%
Other buyout
Nonmezzanine private debt
Co-investment funds or funds
investing directly in deals
Distressed equity or debt funds
9%
14%
24%
Mezzanine
Other
Growth capital
Venture capital
Fund count: 71. Numbers do not add to 100% due to rounding.
Source: Dow Jones Private Equity Analyst Sources of Capital Survey
June 2015
analysis
Capital Source by Investor Type (All Funds)
2%
2% 2% 1%
2%
3%
4%
31%
6%
6%
7%
15%
10%
10%
2015*
1%
5%
1%
1%
9%
32%
6%
3%
5%
Public pension funds
Other
Insurance companies
Corporate pension funds
Endowments/Foundations
Sovereign wealth funds
Wealthy investors/Feeder funds
Family offices
Funds of funds
Discretionary advisers
GP contributions
Bank/financial services
Union pension funds
Corporations directly
8%
12%
5%
6%
6%
2014
*Numbers do not add to 100% due to rounding.
capital contributor to the asset class. Meanwhile, corporate
pensions chipped in another 10% of the money raised, up
from 6% in last year’s survey sample.
Defined benefit plans, both large and small, face growing
liabilities as their beneficiaries age. Many have expanded
their allocations to private equity as part of an overall push
into alternative assets aimed at bulking investment returns
to try to meet those liabilities.
“We’ve seen a real trend on the smaller end toward
aggregation of smaller plans,” said Amanda McCrystal,
global head of marketing and communications at Pantheon,
a global alternative asset manager. “As a group, they can
get the purchasing power and the discounts associated
with larger amounts of capital.”
Some of the smallest investors also continue to grow
in importance to private equity fundraising. Wealthy
investors and feeder funds accounted for 6% of the
money raised in our survey sample, while family offices
contributed 4%. However, the actual percentage of
capital coming from wealthy individuals may be even
higher, given that a number of the firms indicating they
raised capital from “other” sources listed accredited
investors or high-net-worth individuals in the “other”
category. Investors that fell into the “other” category
contributed 15% of the capital raised by firms in this
year’s survey sample, up from 8% in last year’s survey.
With yields relatively low in more traditional asset classes
such as fixed income, wealthy investors have sought access
to higher performing, albeit riskier, asset classes such as
infrastructure, oil and gas, and private equity.
Despite the logistic challenges associated with
aggregating many small commitments from an investor
class that tends to desire more liquidity than do
institutional LPs, more private equity firms are eager to tap
into this investor class. In the past two years, Kohlberg
Kravis Roberts & Co. and Carlyle Group each formed
investment vehicles designed to provide accredited
investors with access to their funds.
“They aren’t the biggest [participants] in private equity, but
they have more capital than the pension funds,” said Paul
Ward, a managing partner at Pantheon. “It’s a very big
market and a big opportunity.”
Although more limited partners are reducing the number
of general partner relationships in their portfolios, private
equity firms in our survey sample managed to raise some
45% of their capital from new investors, roughly on par
with last year’s survey and ahead of survey respondents
in 2013. The capital flowing back to LPs has given
them a bit more flexibility to fill out specific niches
in their portfolios where they remain underallocated,
although placement agents said the bar for adding new
relationships remains high.
“The standard limited partner has a fairly robust portfolio,
so the new GPs have to be differentiated in some way,”
said Alan Pardee, a managing partner at Mercury Capital
Advisors, adding that his firm has seen investors strike new
GP relationships in the energy sector, metals and mining,
farmland and infrastructure, as well as in buyouts.
U.S. investors remain the strongest source of capital for
fundraising GPs in this year’s survey, contributing more
than two-thirds of the capital raised, roughly on par with
last year’s survey. Moderate yet steady economic growth
New LPs vs. Prior LPs (All Funds)
100%
0
New LPs
55%
52%
45%
48%
66%
2015
2014
Prior LPs
34%
2013
analysis
Capital Source by Geography (All Funds): Non-U.S. LPs
4%
28%
9%
Asia (excluding Japan)
Canada
Western Europe
Middle East
United Kingdom
Latin America
Australia
13%
7%
19%
16%
2015
1% 3%
12%
Other
Eastern or Central Europe
22%
3%
2%
Japan
12%
15%
midmarket funds are finding fundraising quite easy. They
can raise funds locally and don’t have to travel that far. “
Although Western Europe has seen a decline in importance as
a capital source, Asian LPs continue to grow in prominence, a
trend that has been building over the past several years. Asian
investors, excluding the Japanese, contributed some 28% of
the capital raised from non-U.S. investors in this year’s survey,
up from 22% in last year’s survey.
1%
3% 2%
5%
June 2015
7%
24%
2014*
*Numbers do not add to 100% due to rounding.
in the U.S., combined with a strong dollar and robust
returns flowing back to U.S investors from their underlying
private equity managers, all likely contributed to the results.
However, the heavier weighting of U.S. managers in this
year’s survey sample also likely influenced these results.
Among those firms that raised capital abroad, the
percentage that they raised from LPs in Western Europe
declined for the second year in a row. Western Europe
accounted for only about 16% of the capital raised from
non-U.S. investors, compared with 24% of the capital in
last year’s survey. The percentage of capital coming from
Western Europe has steadily declined in the past several
years of this survey: In 2009, investors from Western
Europe contributed more than 47% of capital raised by
managers in a similar survey.
A relative lack of megafund managers participating in
this year’s survey sample likely contributed to the decline,
particularly as managers of small and midsize funds often
have less need to raise capital abroad and fewer resources
for funding overseas marketing campaigns. However, the
official implementation of the Alternative Investment Fund
Managers Directive, a raft of regulation that effectively limits
the ability of non-European managers to raise capital from
European investors, is also likely to be a factor.
“At the margin, it’s definitely an influence,” Pantheon’s Paul
Ward said of AIFMD’s impact. “The more successful [U.S.]
Korea Investment Corp. as well as China’s CIC
Investment Corp. and State Administration of Foreign
Exchange are some of the Asian institutional investors
ramping up their private equity programs in recent years.
Ted Ughetta, a partner in the private equity and investment
funds practice at law firm Nixon Peabody LLP, said
participation by Asian LPs in the private equity market has
expanded beyond the large sovereign wealth funds to
include more corporate LPs and family offices.
“They’re following groups like CIC and learning from the
experiences of the large sovereign wealth funds,” Mr.
Ughetta said. “We’ve seen that from certain Chinese
corporations that are looking to set up offices in the States
to be more active participants.”
Latin American LPs also expanded their share of the pie,
contributing 5% of the capital in this year’s survey sample,
up from 2% in last year’s sample. Although differences in
survey samples may be at play, participation in private equity
from pension systems in Colombia, Peru and Chile has
continued to grow in recent years.
After an active 2014, it remains to be seen how many of
these trends will sustain themselves through the coming
year, although so far fundraising momentum still seems fairly
robust. As the year unfolds, however, some investors may
pause to reassess the capital that they have deployed.
“There seems to be a bit of a digestion process taking place
in the first quarter,” said Mr. Pardee of Mercury Capital.
“Investors have done a lot of reups and they’re continuing to
do reups. [But] we’ve seen a few investment decisions slide
from quarter to quarter.” n
Capital Source: U.S. vs. Non-U.S. Investors (All Funds)
34%
37%
U.S. Investors
63%
66%
2015
2014
Non-U.S. Investors
June 2015
analysis
Spring Cleaning: PE Firms Exit
Portfolio Companies at Faster Pace
Alistair Watson, a senior investment manager at Aberdeen
Asset Management, said it was natural in the current
ebullient exit market for holding periods to decline to more
“normalized” levels. “The inventory of precrisis, peak market
transactions continues to reduce through exit activity, and
these deals have typically had longer hold periods due
partly to the ‘lost’ years endured in the financial crisis.”
Mr. Watson added there had been “some attractively priced
deals completed in the 2009-to-2012 period, which have
performed at or above plan through the recovery, and
managers are ready to harvest these investments in the
strong current exit environment.”
By JENNIFER BOLLEN and AYESHA JAVED
are exiting their
Private equity firms
portfolio companies earlier
for the first time since the economic downturn, amid the
strongest exit environment in years.
The length of time buyout firms held portfolio companies fell
to an average of 5.5 years as of April 23, according to data
provider Preqin Ltd., the first decrease since 2008. Preqin
said the average length of time firms held on to investments
has been rising in recent years to a record high of 5.9 years
for businesses sold in 2014, compared with an average of
4.1 years in 2008.
“The timing stretched because the volume of large-cap
deals done in 2006 and 2007 got stuck, effectively, in
portfolios, so that provided the longer hold,” said Graeme
Gunn, a partner at U.K. fund-of-funds manager SL Capital
Partners. “The current positive market environment,
quantitative easing in Europe and higher liquidity in the U.S.
have allowed private equity funds to reduce the time to exit.”
European buyouts this year had the longest average hold
period, hitting an average of 5.7 years, compared with 5.3
years for companies in North America.
The shortened investment periods come amid a surge in
confidence in the exit markets. Last year, private equity exits
in Europe reached $142.5 billion, which was the highest
since 2007, according to data provider Dealogic Ltd. From
Jan. 1 to May 15 of this year, there have been 158 private
equity exits in Europe worth $37.6 billion.
“We lost two years of activity in the financial crisis when
nothing happened,” said Mr. Gunn. “That is becoming a distant
memory now, but during this time we had no investments or
exits...Today is a good exit environment across the board, so a
lot of the funds are taking the opportunity [to exit], as you don’t
know when the window will close.”
Some private equity firms have taken advantage of the strong
exit market to sell their portfolio companies after shorterthan-average hold periods. In March, CVC Capital Partners
agreed to sell London-based online payments company
Skrill Ltd. for about €1.1 billion, less than two years after
investing in the business, in a deal that valued Skrill at €550
million. CVC also sold gym chain Virgin Active Ltd. in April
after less than four years of ownership. The deal generated
a return of more than two-times CVC’s investment and an
internal rate of return approaching 30%.
“As investors, we would encourage managers to take
advantage of attractive exit environments,” said Mr. Watson,
“but always to balance current expected exit value against
the future growth and value potential of portfolio companies
and the associated risks.”
He added that portfolio companies could “undergo
significant positive change and operational improvement in
a three- to five-year period,” which he said was considered
an “optimal” hold period. n
Buyout Firms Starting to Sell Portfolio Companies
More Quickly
Global Average Holding Period, in Years
6 yrs.
5
4
5.1
4.5
4.4
4.1
5.3
5.5
5.8
5.9
5.5
4.3
3
2
1
0
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015*
*As of April 23. Source: Preqin Ltd.
analysis
June 2015
Amid Tepid Returns, LPs Approach
Emerging Markets Cautiously
By HILLARY CANADA
equity is
Emerging markets private
starting to lose
a bit of its luster for some limited partners as returns fail to
measure up to the risks.
At the 2015 Global Private Equity Conference hosted last
month in Washington, D.C., by the International Finance
Corp. and the Emerging Markets Private Equity Association,
several institutional investors spoke of disappointing returns
and other risks that accompany such investments, including
shaky currencies, unfriendly governments, corruption and
slowing growth.
Global Environment Fund President and Chief Executive
Jeffrey Leonard also cited pain in Brazil, adding that raising
a Brazil-only fund is “challenging these days.”
But he added that tough times may be precisely the reason
to raise such a fund as entry valuations become lower. Mr.
Leonard likened maneuvering in difficult markets to his
experiences mountain climbing.
“Our rule of thumb was to follow the storm,” he said. “As
soon as we saw a storm lifting, that’s when we moved. So
when we reached the top, we had a clear sky ahead.”
BlackRock Private Equity Managing Director Craig Payne
said that in his firm’s core funds, the emerging markets
allocation has trended down over time, partly because of
performance. Out of 65 maturing emerging-markets funds
raised in the 2005-to-2010 time range that his firm has
backed, Mr. Payne said he could find only three that had
returned two-times total value to paid in capital or more. Only
one of the funds produced a net return of 20% or better.
“So either we’re doing a very bad job of selecting fund
managers, or there is a systemic issue,” he added.
Other limited partners, including University of Virginia
Investment Management Co. Chief Executive and Chief
Investment Officer Lawrence Kochard and Peter Keehn, global
head of private equity at Allstate Investments, said they
take a very measured approach to such investments. Both
adamantly opposed the idea of backing emerging-markets
private equity simply as a means of portfolio diversification.
To get to the point of committing, Allstate needs to “see a
compelling case for excess returns,” said Mr. Keehn.
Performance isn’t the only issue weighing on emergingmarkets managers. “When we look around the
world, there’s not a lot to like,” said Cartica Capital
Management Senior Managing Director Teresa Barger,
citing slowing global growth as a major obstacle.
“The 2014 elections disappointed,” she said. Many countries
“reelected the bad old guys,” so they’re missing out on the
“reform momentum” that can bolster economic advances,
she said. She pointed to the Philippines, India, Poland and
Mexico as the “reformers,” where some action is under way.
Other promising nations have fallen short.
“Turkey made big leaps forward when they created policy
reforms in hopes of joining EU,” she said. “Sad to say, that
has not continued.”
Despite the obstacles, limited partners, hungry for yield
in a low-interest-rate environment, haven’t abandoned
emerging-markets private equity.
“We had to move from an allocation view to a selection view,”
said Travis Angevine, director of private markets at the Alfred
I. DuPont Testamentary Trust. “You have to go and find the
manager that is doing something you haven’t seen before,”
he said, pointing to a manager his firm recently backed that is
focused on low-income housing in Latin America.
“We think there’s opportunity,” said Mr. Payne of BlackRock.
“We’re not pulling back. There are not many places in
the world where you can buy a lower middle market
business for less than six times [earnings before interest
taxes, depreciation and amortization]. In some parts of the
developing world, that’s still possible.” n
analysis
June 2015
Industry Data
Despite Exits, PE Returns Disappoint
have described the
Private equity firms
current exit environment as
“biblical,” but that doesn’t mean the returns are heavenly.
In fact, 96% of the 408 U.S. private equity executives polled
in Deloitte LLP’s M&A Trends Report 2015 said the exits
they made in the previous year fell short of targeted returns.
The survey included a total of 2,500 corporate and private
equity executives.
Mixed Bag on PE Exits
Of PE Industry Respondents:
96%
100%
96%
94%
89%
80
Over the longer term, however, private equity outperformed,
generating a net 13.89% over a 10-year period, compared
with 8.11% for the S&P.
Three out of four respondents to the survey said they
anticipate the level of exits will remain high within the
next 12 months. More than 60% said they anticipate the
primary source of exits will be sales to strategic buyers.
About 38% believed exits could come in the form of initial
public offerings.
A majority of these same executives believe 2015 will also
be a robust year for deals. More than half of the private
equity respondents anticipated closing at least five add-on
acquisitions in 2015, and of those same respondents, 22%
believe they will make more than 11 add-on deals this year. n
60
40
20
0
In the short term, private equity had a difficult time keeping
pace with the long-running bull market. Through Sept. 30,
Cambridge Associates LLC’s one-year-returns benchmark
for global buyout and growth equity funds was a net 15.9%,
compared with 19.73% returned by the S&P 500.
Those Saying at Least Some
Portion of Their Deals the Previous
Year Fell Short of Targeted Returns
2015 report
Those Forecasting Average to
Very High Levels of Deal Activity
2014 report
Source: Deloitte LLP
Enticed by a receptive market for initial public offerings, as well
as corporate acquirers seeking growth through acquisitions
and other private equity firms eager to deploy capital, buyout
shops have been exiting companies at a record pace, even
after holding some businesses less than a year.
Private equity firms world-wide generated some $428
billion from the sales and initial public offerings of 1,604
companies last year, according to data provider Preqin Ltd.
Despite the vast volume of sales, return figures for the past
two years have missed the mark for a substantial number of
the deal makers polled by Deloitte. The economy was partly
to blame for the missed return expectations.
Barry Curtis, a partner at Deloitte M&A Services, said in
an email that the disappointment stemmed in part from
“optimistic growth assumptions” firms had about the
investments they made from funds raised following the
financial crisis that began in 2007.
Lower-than-expected growth in many sectors also may
have partially offset the high multiples businesses are
commanding, Mr. Curtis added.
in brief
European VC Regains Ground
Venture capital investment in European companies rose to
its highest figure since the third quarter of 2001, according
to data from Dow Jones VentureSource. European companies
raised €2.6 billion in 345 deals during the first quarter of
2015, an increase of 41% over the amount raised during the
fourth quarter of 2014 despite a 5% decline in the number
of deals completed. Consumer services received the largest
investment allocation during the first quarter, gathering €1.3
billion through 103 deals, 50% of the total VC raised by
European companies during the period.
Health-Care Startups Raise $3.9B
U.S. medical startups raised a record $3.9 billion in venture
capital in the first quarter amid rising investor interest in
biotechnology, digital health and health-care services. The
period’s health-care total surpassed the previous record of
$3.42 billion invested in the second quarter of 2014, according
to Dow Jones VentureSource. Driving investment in the sector
was a strong market for initial public offerings, increasing
confidence in the success of drugs in clinical trials and
acquisitions by large drugmakers needing to replenish their
pipelines. Biotechnology investment accounted for most of the
increase in venture funding, with investors pouring $2.14 billion
into biotech companies, up 72% from the first quarter of 2014.
limited partners
June 2015
Kentucky Retirement Systems Raises
the Bar for PE as It Faces Funding Woes
By DAWN LIM
state’s failure to meet
Pinched by the
its pension contribution
requirements, the Kentucky Retirement Systems is raising
the bar for private equity as it looks to write larger checks to
fewer managers.
The Frankfort, Ky., system plans to make annual commitments
of $130 million to $220 million to between three and five
managers in the year ahead, a more tempered pace than it
had heading into 2008, when it was committing more than
$250 million annually. The
pension investor, which has
typically pledged $50 million to
$100 million to each fund, will
now focus on commitments at
the larger end of that range.
Kentucky
Retirement
Systems
Assets
Kentucky Retirement manages
$11.55 billion in pension
assets, of which 9.8% was in
private equity, as of March 31.
It also oversees $4.19 billion in
insurance assets, of which 6.3%
was in PE.The target allocation
to PE is 10% for both pools.
Key Personnel
David Peden is the chief
investment officer and Bill
Murnighan is acting director
of private equity. Brent
Aldridge recently became
director of real estate
and real return assets.
Recent Commitments
DB Secondaries Opportunities
Fund III LP, Cerberus Business
Finance Lending Platform
separate account.
“We want to get to fewer
and chunkier relationships,”
said David Peden, who
heads investments for some
$16 billion in pension and
insurance assets.
Mr. Peden, formerly the director
of fixed income, took the chief
investment officer position last
year following a rocky patch for
the pension fund. Private equity
investments ground to a halt at
Kentucky Retirement in 2008
due to liquidity concerns during
the economic downturn. When
the pension system once again
began making commitments to
private equity in 2009, it had to
tread lightly.
The funded status of its
plans deteriorated as the
state fell short on pension contributions. Kentucky has
one of the worst-funded pension systems in the country,
though pension reform measures passed in 2013 by the
state legislature has raised hopes it can improve its funding
status. One of the weaker plans administered by Kentucky
Retirement, the Kentucky Employees Retirement System’s
pension plan for workers in sectors deemed “nonhazardous,”
posted that, as of June 30, 2014, it had only 21% of the
funds needed to cover the obligations it owed. Critics
also scrutinized the fees the pension fund was paying to
hedge fund and alternatives managers, putting pressure on
Kentucky Retirement to focus on controlling costs.
Hit by staff turnover, the system sought a fresh start. Ending
Altius Associates’ role as a private equity adviser after a
roughly two-year stint, Kentucky Retirement brought on
Pension Consulting Alliance in 2014, in hopes the new
arrangement would allow the staff to more directly shape
the portfolio around Kentucky’s funding challenges.
As part of that effort, Kentucky Retirement, which has
backed funds from venture capital firms including
Institutional Venture Partners and Duff Ackerman &
Goodrich, may scale back its investments to venture and
growth equity, out of concern it can’t generate stable longterm returns through the asset class. “The challenge is in
justifying locking up money in hope of a winner or two,” said
Mr. Peden. “We might keep a ‘baby toe’ in venture capital,
but it has to be a compelling story.” Kentucky Retirement, the largest buyout relationships of which
include Leonard Green & Partners and Blackstone Group,
plans to focus on smaller private equity funds where it can
have more clout as an investor. By targeting groups raising
funds of up to a billion dollars, it is hoping its general partners
will face less competition than their larger peers. Kentucky
Retirement is also considering whether to make its first move
into private equity co-investments, in line with efforts to reduce
fees and forge more meaningful ties with managers. The
system recently got approval to co-invest in real estate deals.
As it recalibrates its approach to private equity, KRS wants
to broaden the reach of its portfolio. It will also look into ways
to capture energy opportunities amid recent selloffs and
will consider more global exposure for its portfolio, which is
more than 90% invested in U.S. partnerships. Last year, KRS
made its first private credit investment out of its fixed income
bucket, awarding a $125 million separate account mandate
to Cerberus Capital Management to make senior secured
loans to midmarket companies. Across the broader portfolio,
the pension fund’s priorities continue to shift to pruning,
rather than growing out, alternative exposures.
Kentucky Retirement is no longer as focused on expanding
its allocations to real estate, real return and absolute return
strategies after spending the last five years “in phase one of
building out the alternatives portfolio,” Mr. Peden said.
As a new asset allocation review looms, changes to Kentucky
Retirement’s portfolio are likely to be less drastic than they
were four years ago, when the system, looking to modernize
its mix, carved out a new absolute return sleeve and became
more active in real estate, real return and hedge fund investing.
“We’re going to be much more selective and will focus
on maintaining the strongest relations as we don’t feel
compelled to deploy capital now,” said Mr. Peden. n
June 2015
fund news
General Partners: Buyout
Spirits Capital Cheers On Millennials’
Taste for the New
By AMY OR
not even vintage spirits
It seems that stand the test of time, at
least not among younger consumers.
“Blended Scotch is declining as aging boomers are
consuming less. And they aren’t appealing to next
generations, the Xers and the millennials,” said Todd Martin,
a former president of Allied Domecq PLC’s North America
division and founder of Daucourt Martin Imports LLC. “They
aren’t interested in something with traditional heritage.”
Spirits Capital Partners, of Dallas, seeks to cater to these
changing tastes in distilled spirits.
Set up by Mr. Martin, in partnership with Chicago’s Silver Pine
Partners, Spirits Capital is seeking to back emerging spirits
brands that have a track record
of attracting drinkers but need
capital to give them the extra
push to bring their products to
markets throughout the country.
The Firm
“Millennials aren’t choosing
Founder Todd Martin set up
traditional brands that have
Daucourt Martin Imports LLC,
been around for 30 or 40
an importer and distributor
years. Instead, they are
of French spirits to the U.S.
finding brands that they can
market that launched brands
X-Rated Fusion Liqueur and
call their own,” said Silver
Jean-Marc XO Vodka, both
Pine founder and Managing
sold to Gruppo CampariDirector Vincent Hemmer.
Spirits Capital
Partners
Milano Spa in 2013.
The Portfolio
Real McCoy brand of rum was
based on the original recipes
of Prohibition-era smuggler
Bill McCoy. Spud Vodka,
meanwhile, came second
in the 2015 Ultimate Spirits
Challenge with 94 points.
Data provider IBISWorld said
in a January note that the
industry’s potential market size
would get a lift from those born
during the early 1990s baby
boomlet reaching drinking age
in the next five years.
“Spirits are more popular
today than when these customers were born,” according to
the memo. “Distilleries have begun to alter product mixes to
enhance the selection of milder ready-to-drink beverages to
capture this audience’s interest.”
Financial investors have participated in various segments of
the alcoholic beverage industry. Kohlberg Kravis Roberts
& Co. and Affinity Equity Partners, for example, backed
South Korean brewer Oriental Brewery Co. in 2009 and
sold it to Anheuser-Busch InBev NV last year. Firms like New
York’s Bacchus Capital Management and TWT Investment
Partners, of Ridgefield, Conn., seek investments in wine.
Although there are angel investors for hard liquor, private
equity participation in spirits has been low. “It’s harder to
[build brands] in spirits as the consumption of spirits in bars
is almost always in mixed drinks – not like beer or wine,
where you can finish a bottle or two in an evening,” he said.
Still, Mr. Martin said, “most of the profit in alcoholic
beverages is made in distilled spirits.”
Spirits Capital writes equity checks of $5 million to $25
million but believes the bulk of the opportunities occur in the
$5 million-to-$10 million segment of the market, where new
brands are aplenty.
Spirits Capital, which funds investments in partnership with
Silver Pine on a deal-by-deal basis, made two investments
in April: Rum maker Real McCoy Spirits Corp. and Spud
Partners LLC, producer of a vodka made from potatoes.
Investments going forward will focus on the type of spirits that
millennials favor. “American craft whiskey is booming, including
bourbon and rye and, to a lesser extent, rum,” Mr. Martin said.
Mr. Martin and Mr. Hemmer’s partnership can be traced
back to more than a decade ago, when the latter was with
Chicago firm GTCR.
The pair said they tried to buy family-held spirits companies
and portfolios of tail brands from larger spirits companies
but were deterred by the “unrealistic prices.” But with Spirits
Capital’s strategy of scaling emerging brands, strategic buyers’
ability to pay a premium for assets turns into an advantage.
Mr. Martin said Spirits Capital views major spirits companies,
which need to supplement existing brands’ slow growth by
adding newer brands to the mix, as a natural exit channel.
“Strategic buyers are able to rapidly broaden a spirits company’s distribution as they can run it through their own network
to substantially grow revenue,” said Mr. Hemmer. “They also
benefit from material synergies throughout the cost structure.” n
fund news
June 2015
General Partners: VC
Menlo Ventures Stays Fresh
With $400M for Fund XII
By DEBORAH GAGE
transitions can be
Navigating generational
difficult for venture capital firms,
Entrepreneurs aren’t just looking for firm brands anymore,
Mr. Siegel said, “but for individual people who are really
smart about my market, my business and have interesting
things to say and [to] add value on my board.”
But Menlo Ventures has cultivated some best practices as
it approaches its 40th anniversary next year and begins to
invest its 12th fund.
Menlo will continue in Fund XII with other practices that
worked in Fund XI, the partners said. Although they
declined to comment on returns, Fund XI has done well,
according to a summary published by limited partner
Washington State Investment Board, with a net internal
rate of return of 81.6% as of Sept. 30.
whose business is generally based on nurturing networks
developed by small partnerships in which the loss of a
single person could be critical to the firm.
Menlo Ventures
The Firm
Based in new larger offices
on Menlo Park, Calif.’s storied
Sand Hill Road, Menlo Ventures
continues with six managing
directors, including Doug
Carlisle, Shawn Carolan, Venky
Ganesan, John Jarve, Mark
Siegel and Pravin Vazirani. Mr.
Carlisle and Mr. Jarve will retire
after this fund. Menlo hopes to
fill the two partner slots from
within, the firm said.
The Fund
Menlo Ventures XII LP closed
in April at $400 million, the
same size as its predecessor
fund, which closed in 2010.
These two funds are a third or
less the size of Menlo’s ninth
and 10th funds, which closed
at $1.2 billion in 2005 and
$1.5 billion in 2000.
Recent Deals
In April, Menlo counted seven
exits in eighteen months,
including those of Dropcam
Inc. (acquired by Google
Inc.’s Nest Labs for $555
million), EdgeCast Networks
Inc. (acquired by Verizon
Communications Inc. for
$395 million) and Flurry Inc.
(acquired by Yahoo Inc.).
Menlo closed the new fund in
April at $400 million, the same
size as its previous vehicle,
and has begun to pass the
responsibility for investing it to
a new generation of partners.
Two of its six managing
directors – Doug Carlisle, who
joined Menlo in 1982, and John
Jarve, who joined in 1985 – will
begin the process of retirement
after this fund, following in
the footsteps of founder H.
DuBose Montgomery, who
started the firm in 1976.
Retirement at Menlo doesn’t
mean disappearing onto the
golf course, however. The idea
is to be gracious and generous
and provide continuity for
the firm’s younger partners,
according to General Partner
Mark Siegel.
At Menlo, retirement means
staying active in the firm’s
operations for another three
or four years, keeping an
office and continuing to sit on
boards, while cutting back on
economic interests in the firm
to make room for new people.
New people keep Menlo vital,
Mr. Siegel said, because older
partners may have “lost some of the drive and hunger it
takes to be an investor. Venture capital is more competitive
than ever today, and you’ve got to have both feet in.”
The firm will make about half of its investments from Fund XII
in enterprise companies and half in consumer companies,
instead of favoring enterprise investments as it did in the
past. It is also making a more concerted effort to reach out
to media rather than working to stay out of the news.
The firm is tweaking its seed program as well, carving about
$15 million out of Fund XII, compared with $20 million out
of Fund XI, and making larger investments in about half as
many companies, which will mean about 30 investments
instead of 60.
The changes reflect what Mr. Siegel called “a glut of seed
companies,” not all of which will be able to raise follow-on
funding, and a more thoughtful approach to seed investing
by Menlo.
Entrepreneurs will be offered milestones to keep them on
track, and if the startups don’t work out, “we will be sure to
keep those people in the family,” he said, offering space in
Menlo’s larger new office on Sand Hill Road so entrepreneurs
can try to turn their technology into something new.
Seed companies also sometimes get acquired, said
Managing Director Venky Ganesan, and “we figure these
entrepreneurs will be doing this again.”
Menlo also plans to continue adding entrepreneurs in
residence who can incubate companies at Menlo and
expects to double its venture partner numbers to about
a half dozen, Mr. Siegel said. These are people like Jim
Dawson, the former chief sales officer of Fusion-io Inc. (now
part of SanDisk Corp.), and Avery More, the founder and
former chief executive of CompuCom Systems Inc., who
have long track records in the industry and can help Menlo
source deals.
Mr. More, for instance, was on the board of Check Inc. and
was responsible for leading Check’s sale to Intuit Inc. last
year for about $360 million. n
June 2015
fund news
roundups
U.S. & Canada
U.S. & CANADA
EUROPE
Buyouts
Buyouts
26
Banc Funds
Boathouse Capital
Catalyst Capital Group
27
Clearlake Capital
EnerVest
I Squared Capital
Leavitt Equity Partners
Napier Park Financial Partners
Northleaf Capital Partners
Old Ironsides Energy
Post Capital Partners
28
SFW Capital Partners
Signal Hill Equity Partners
Staple Street Capital
TPG Growth
Trilantic Capital Partners
34
Elysian Capital
35
EQT Partners
Kings Park Capital
Mezzanine & Other Debt
Venture Capital
35
Joint Polish Investment
Fund Management
Safran SA
Secondary
35
Mantra Gestion
ASIA
35
Babson Capital Management
Venture Capital
37
Lightspeed Venture Partners
28
Apollo Global Management
30
Harbert Management Corp.
LATIN AMERICA
Venture Capital
37
Linzor Capital Partners
30
AKT IP Ventures
Altitude Life Science Ventures
Aspect Ventures
Atlas Venture
Catalyst Investors
Collaborative Fund
Cross Culture VC
Draper Nexus Ventures
31
Founders’ Co-op
GreatPoint Ventures
Illuminate Ventures
Insight Venture Partners
Institutional Venture Partners
Longwood Fund
Mission Bay Capital
MkII Ventures
32
MPM Capital
Redpoint Ventures
Rethink Education
RiverVest Venture Partners
SherpaVentures
Slow Ventures
True Ventures
Whitecap Venture Partners
Secondary
Buyouts
MIDDLE EAST
Venture Capital
37
Eucalyptus Growth Capital
Middle East Venture Partners
Buyouts
uBanc Funds, Chicago
Banc Funds, one of the oldest private equity firms focused
on investments in small banks, thrifts and other financial
institutions, has raised a little more than $416 million so
far for Banc Fund IX LP, according to a regulatory filing.
The capital raised so far puts the fund more than halfway
to the $600 million offering amount indicated in the filing.
Investors approving commitments to the fund include the
Washington State Investment Board and the Minnesota
State Board of Investment, according to the pension
systems’ various meeting minutes. The fund’s predecessor,
Banc Fund VIII LP, a $650 million pool raised in 2009,
generated a 12.42% net internal rate of return as of
Sept. 30, according to WSIB performance data.
uBoathouse Capital, Wayne, Pa.
Junior capital investor Boathouse Capital said it held a final
close on $230 million for its second fund licensed under the
Small Business Investment Company program. Boathouse
Capital II LP will focus on structured debt and equity
investments of $5 million to $25 million in growing businesses
in the lower midmarket, according to a news release. The firm
closed its first SBIC fund, Boathouse Capital LP, in 2011
with $120 million, including matching capital from the U.S.
Small Business Administration. Boathouse participates in
acquisition financing, growth capital investments, majority
and minority recapitalizations, management buyouts,
leveraged buyouts and employee stock ownership plans.
32
Landmark Partners
33
Pomona Capital
uCatalyst Capital Group, Toronto
Funds of Funds
Canadian distressed-for-control investor Catalyst
Capital Group said it reached a first closing on its most
recent fund, Catalyst Fund Limited Partnership V, with
$650 million in capital commitments. Fund V is targeting
$1.25 billion and has a hard cap of $1.5 billion. The
fund’s predecessor closed on $812 million of capital
in 2013, surpassing the vehicle’s target, according to
Dow Jones records. Catalyst said the new fund received
support from existing investors in previous funds, together
with new institutional investors, including university
33
Altegris
34
Knightsbridge Advisers
fund news
endowments, charitable foundations, pension plans,
family offices and financial institutions. Montana Board
of Investments approved a $15 million commitment
to Fund IV in 2012, according to meeting minutes.
uClearlake Capital, Santa Monica, Calif.
Special situations and private equity firm Clearlake
Capital was gearing up for a first close on its flagship
fund between the end of May and early June at around its
$1 billion target, people familiar with the matter said. The
firm plans to wrap up fundraising for Clearlake Capital
Partners IV LP around June and could raise up to $1.35
billion for the fund, according to an investor due diligence
memo. The firm’s third fund, a 2012-vintage vehicle
that closed at $785 million, generated a net internal
rate of return of 23.7% and a net investment multiple of
1.2 times, as of Dec. 31, according to investor data.
uEnerVest, Houston
Energy investor EnerVest planned to hold a first closing
of between $1.2 billion and $1.3 billion on its 14th fund
as early as late April, said a person with direct knowledge
of the matter. The vehicle, EnerVest Energy Institutional
Fund XIV LP, likely will have a series of interim closings
before it completes fundraising by around June 30, the
person said. The vehicle has a $2.5 billion target and a $3
billion hard cap and will pursue investments in natural gas
and oil properties throughout the U.S. Limited partners
committing to Fund XIV include the Washington State
Investment Board and the Orange County Employees
Retirement System. The firm raised its last fund about
three years ago, closing on $2 billion in commitments in
2013. That vehicle, EnerVest Energy Institutional Fund
XIII LP, once levered up, had a purchasing power of
$3.3 billion, Private Equity Analyst previously reported.
uI Squared Capital, New York
I Squared Capital said it closed its debut infrastructure
investment fund with total commitments of $3 billion.
ISQ Global Infrastructure Fund LP received support
from limited partners including pension funds, sovereign
wealth funds, insurance companies, asset managers
and family offices in the U.S., Canada, Europe, the
Middle East, Asia and Australia, according to a news
release. Limited partners committing to the fund include
Rhode Island State Investment Commission and
New Mexico Regional Retirement Board. Mitsubishi
Corp. committed $100 million as part of a strategic
partnership for infrastructure investment alongside
I Squared, according to an earlier news release.
uLeavitt Equity Partners, Salt Lake City
Leavitt Equity Partners has raised more than $75 million
so far from strategic health-care companies and healthcare entrepreneurs for its inaugural fund to co-invest in
health-care deals, a person familiar with the situation
said. It aims to wrap up fundraising for Leavitt Equity
June 2015
Partners I LP at its $100 million hard cap in the second
quarter, the person added. Established in August, Leavitt
Equity Partners is an investment subsidiary of Leavitt
Partners, a health-care consultant founded by former
Health and Human Services Secretary Mike Leavitt,
to help industry stakeholders adapt to the changing
dynamics of health-care provisions in the country. Mr.
Leavitt, who is chairman of Leavitt Partners, served in
the administration of President George W. Bush.
uNapier Park Financial Partners, New York
Napier Park Financial Partners, the private equity arm
of Napier Park Global Capital, has closed on $454
million for a new aircraft leasing fund. The firm teamed up
with lessor Air Lease Corp. to form the fund, Blackbird
Capital I LLC, according to a news release. In addition
to providing 9.5% of equity to the fund, Air Lease will
provide servicing to Blackbird. Napier Park plans to use the
equity in the acquisition of about $2 billion in commercial
aircraft assets by the end of 2016. Napier has previously
teamed up with corporate partners to form investment
joint ventures. The firm operates a railcar leasing fund
that was established as part of a joint venture with Trinity
Industries Leasing Co., a subsidiary of Trinity Industries Inc.
uNorthleaf Capital Partners, Toronto
Canadian private equity firm Northleaf Capital Partners
said its Northleaf Venture Catalyst Fund held another
closing, adding Ontario Pension Board as its newest
investor. Total commitments from all investors now
amount to $264 million, the firm said. The fund, a joint
initiative between Canadian institutional investors
and the governments of Canada and Ontario, invests
chiefly in Canadian venture capital and growth equity
funds and also makes co-investments. It started
making investments in January 2014 and has backed
six venture funds and made five direct investments in
companies so far. It has committed to funds managed
by XPV Capital, Georgian Partners, Versant Ventures,
Golden Venture Partners, Version One Ventures and
Relay Ventures, and completed direct investments in
Wattpad Inc., Vision Critical Communications Inc.,
Silanis Inc., eSentire Inc. and FreshBooks Inc.
uOld Ironsides Energy, Boston
Old Ironsides Energy said it held the final closing of its
latest vehicle, Old Ironsides Energy Fund II, with $1.3 billion
in commitments. The oil and gas investment manager said in
a news release that Fund II will acquire and develop assets
in the upstream and midstream sectors, primarily in the U.S.
and Canada. Old Ironsides traces its roots back to the former
energy investment team of insurer Liberty Mutual Holding Co.
uPost Capital Partners, New York
Post Capital Partners, a firm focused on investments in
small buyouts, has raised $100.5 million for its latest fund,
according to a filing with the Securities and Exchange
June 2015
fund news
Commission. The amount raised so far for Post Capital Equity
Partners III LP surpasses the fund’s $100 million target and
is slightly larger than the firm’s previous fund, which wrapped
up in 2008 with a little less than $100 million, Private Equity
Analyst previously reported. The firm held an initial closing on
$52 million for the fund in the spring of 2014.
in North America with annual revenue of $50 million to
$500 million. It plans to make investments of $15 million
to $50 million, though with support from co-investing
limited partners, it could invest as much as $75 million in
a transaction. Mr. Owens said the firm plans to invest in
between eight and 12 deals from Fund II.
uSFW Capital Partners, Rye, N.Y.
uTPG Growth, Fort Worth, Texas
SFW Capital Partners is the latest specialty investor
to quickly wrap up a fund at its hard cap. The firm
closed on a total of $347.5 million, including limited
partner and general partner commitments, for its latest
vehicle focused exclusively on investments in analytical
tools and related services, said SFW Partner Roger
Freeman. The firm set out roughly seven months ago
to raise a successor to its debut fund, which closed
on $300 million in 2008. It targeted $325 million for
SFW Capital Partners Fund II LP, but managed to close
the fund at its hard cap thanks in part to participation
from a “meaningful” number of return investors and a
handful of exits, said Mr. Freeman. SFW has an extremely
narrow focus: It backs the types of software businesses
that other companies rely on for information, data and
analytics that support research, product development,
process control, quality assurance, compliance,
diagnostics, and sales and marketing. The firm typically
makes equity investments of $10 million to $75 million
in companies with earnings before interest, taxes,
depreciation and amortization of up to $25 million.
TPG Capital’s midmarket and growth equity platform,
TPG Growth, has closed its third fund with more than
$3 billion in capital commitments, according to a news
release. TPG Growth III LP surpassed its $2.75 billion
target after five months on the market, according to a
news release. The fund also landed about $1 billion
more than its predecessor, TPG Growth II LP, which
closed in 2012 at $2 billion. Investors committing
to TPG Growth III include the Washington State
Investment Board, Oregon Investment Council, New
Jersey State Investment Council, New Mexico State
Investment Council, Teachers’ Retirement System of
Louisiana and State of Wisconsin Investment Board.
uSignal Hill Equity Partners, Toronto
Signal Hill Equity Partners said it has closed its
third fund and a parallel partnership with 142 million
Canadian dollars in committed capital. The firm said
Signal Hill Equity Partners III LP was oversubscribed
as surpassed its initial target of C$100 million. The
firm also announced a closing for Signal Hill Equity
Partnership (International) III LP. Signal Hill said it
received commitments from new and existing investors.
A predecessor vehicle, Signal Hill Equity Partners II LP,
closed in 2008 with C$100 million in commitments.
Signal Hill, with offices in Toronto and Calgary, Alberta,
targets equity investments of C$8 million in C$30
million in business and consumer services, specialty
manufacturing, building products, food and consumer
products, and resource services companies with
enterprise values of C$15 million to C$75 million.
uStaple Street Capital, New York
Staple Street Capital said it reached the fund’s hard
cap, closing on $265 million for its first institutional fund.
After launching fundraising in the summer, the firm held
a first close for Staple Street Capital II LP in December.
Staple Street focused its marketing efforts primarily in
North America, according to co-founder and Managing
Director Stephen Owens, raising capital from endowments,
foundations, insurance companies, pension funds, family
offices and funds of funds. The firm is targeting companies
uTrilantic Capital Partners, New York
Trilantic Capital Partners, the private equity firm formed
in 2009 by a group of former Lehman Brothers Holdings
Inc. merchant banking executives, raised nearly $333.1
million so far for a North American energy-focused fund,
according to a filing with the Securities and Exchange
Commission. The firm began marketing the $500 million
vehicle, Trilantic Energy Partners (North America) LP,
last year. In North America, Trilantic typically invests
$50 million to $250 million at a time in companies with
enterprise values of $100 million to $1 billion. The firm,
which has offices in New York, London and Saint Peter
Port, Guernsey, closed a U.S. buyout fund, Trilantic
Capital Partners V LP, at $2.2 billion in late 2013.
uApollo Global Management, New York
Apollo Global Management has raised about $1.05
billion for a fund dedicated to credit opportunities in
the energy sector, in what appears to be a final closing
of the vehicle, according to filings with the Securities
and Exchange Commission and a person familiar with
the situation. Apollo Energy Opportunity Fund LP
has reached its target amount, with no more capital
being offered, the May 8 SEC filing shows. Another
filing shows a related vehicle, Apollo Offshore Energy
Opportunity Fund Ltd., has collected about $736.9
million. The person with knowledge of the matter said
the two vehicles belong to the same pool of capital,
and that the amount raised by the offshore vehicle is
included in the amount raised by the core fund. The
energy credit fund is separate from another energyrelated pool the firm is raising, Apollo Natural Resources
Partners II LP, its second natural resources fund.
Sale-Leaseback Financing
$108,240,535
$76,000,000
$158,600,000
CAD 54,000,000
NYSE: MOH
A subsidiary of IMP
Group Limited
Headquarters
$45,895,000
Structured Parking
NYSE: GT
$39,600,000
$57,000,000
$45,000,000
$160,000,000
NYSE: ED
NASDAQ: MAT
A portfolio company of
Rhone Group
a wholly-owned subsidiary of
$83,000,000
A portfolio company
of AIM
€22,000,000
A portfolio company
of Liberty Global Europe
$84,400,000
$19,000,000
A portfolio company
of AEA Investors
A portfolio company
of KKR
Sale-Leaseback Financing From AG Net Lease
Acquisitions Criteria
AG Net Lease is actively seeking to invest in long-term, netleased corporate real estate in the US and abroad in transactions
ranging from $15 million to $600 million. AG Net Lease is seeking
to purchase in excess of $500 million in real estate assets
annually. We believe Angelo, Gordon’s credit and real estate
underwriting expertise ensures highly competitive pricing and
speed of execution to tenants and sponsors.
•
•
Size:
$15 - 600 million
Location:
North America and other
established markets
•
•
Lease term:
15 - 20 years, plus renewals
Property Type: Industrial, office, retail,
flex/R&D and special-use
•
•
•
Tenant Credit: Rated and unrated
Lease:
Single tenant, triple net
Additional:
Build-to-suit and expansion
Contact Gordon J. Whiting, Portfolio Manager
212-883-4157 • gwhiting@angelogordon.com
Angelo, Gordon & Co. • www.angelogordon.com/netlease
June 2015
fund news
uHarbert Management Corp., Birmingham, Ala.
Harbert Management Corp. said it closed its third
mezzanine debt fund at $165 million. The vehicle, Harbert
Mezzanine Partners III LP, received support from existing
investors and new commitments from institutional investors,
including public and private pensions, fund-of-funds
firms and family offices, according to a news release. A
predecessor fund, Harbert Mezzanine Partners II LP, closed
in 2006 with at least $92.7 million, according to a filing
with the Securities and Exchange Commission. The new
fund typically will invest $3 million to $15 million in small
to midsize companies seeking funding for organic growth,
acquisitions, recapitalizations and management buyouts.
Venture Capital
uAKT IP Ventures, New York
Incubator AKT IP Ventures said it launched a fund
targeting $20 million to turn patents into businesses.
AKT IP Ventures focuses on the mobile, wearables,
Internet of Things, big data, medical technology and
what it calls “multitouch” sectors. The fund will back
startups in the AKT IP Ventures incubator’s existing
portfolio, as well as between 10 and 15 new joint
ventures, it said. It will help with prototyping, design,
marketing and sales, with the goal of turning ideas into
businesses and into exits within 18 months, it said.
uAltitude Life Science Ventures, Seattle
Altitude Life Science Ventures has set out to raise up
to $75 million for a new investment fund, according to a
regulatory filing. No commitments had been received for the
fund, Altitude Life Science Ventures Fund II LP, as of late April,
the filing indicated. Altitude’s investments include Cambrios
Technologies Corp., Constellation Pharmaceuticals
Inc. and Siluria Technologies Inc. Recently, its portfolio
company Ikaria Inc. was acquired by Mallinckrodt PLC for
about $2.3 billion. The firm also was an investor in Kythera
Biopharmaceuticals Inc., which went public in 2012.
uAspect Ventures, San Francisco
independent firms. The groups operated as separate
franchises since the closing of Atlas’s seventh fund in
2006, and in 2013, they chose to make their split official.
After preparing for the transition, they informed limited
partners of the decision in late 2014. Atlas’s health-care
team kept the Atlas name and moved into new offices in
Cambridge, Mass. The firm now known as Atlas began
raising $250 million for Atlas Venture Fund X LP at the
end of last year.
uCatalyst Investors, New York
Catalyst Investors, a growth equity firm focused on
technology-enabled businesses, has raised $377 million
for its fourth fund, according to a news release. The final
closing for Catalyst Investors IV LP surpassed the fund’s
$350 million target and is larger than the $213 million the
firm raised for its third fund, Catalyst Investors III LP, back
in 2012. Catalyst plans to invest between $10 million and
$60 million at a time in companies across sectors that
span business and consumer services, including digital
media, e-commerce, health-care information technology
and education technology, as well as cloud computing and
communications infrastructure. The firm has already funded
its first investment out of the new fund in a communications
infrastructure entity, IWG II Holdings LLC, which was
formed in partnership with InSite Wireless Group to acquire
communication tower sites from CTI Towers Inc.
uCollaborative Fund, New York
Collaborative Fund, an early investor in startups
such as Kickstarter Inc. and Lyft Inc., is readying to
close its third fund, according to two people familiar
with the situation. The fund, targeted originally at $40
million, will close with about $65 million, one person
said. Collaborative closed a $33 million fund last year,
and a much smaller fund before that. The firm backs
companies in the sharing-economy sector. It also invests
in startups that have a social mission, including AltSchool,
Good Eggs Inc. and Hampton Creek Foods Inc.
uCross Culture VC, Los Angeles
Aspect Ventures said it closed its debut fund, Aspect
Ventures LP, at its $150 million goal. The firm was launched by
Jennifer Scott Fonstad, a former managing director at Draper
Fisher Jurvetson, and Theresia Gouw, a former a managing
partner at Accel Partners. The firm has made more than a
dozen seed and Series A investments in startups including
Vida Health Inc., which makes a mobile app that connects
people with personal health coaches; and Exabeam Inc.,
which makes cybersecurity software, a news release said.
Cross Culture VC, a new early-stage venture firm led by
Lady Gaga’s former manager Troy Carter and Intel Capital
Partner Marlon Nichols, is raising a maiden $50 million fund,
according to a regulatory filing. Speaking on behalf of the
firm, Mr. Nichols declined to comment, citing regulations
around fund solicitation. The fund, Cross Culture Ventures I
LP, didn’t have any commitments as of early May, according
to the filing. Mr. Carter, who rose to prominence while
managing Lady Gaga’s career, is chief executive of the
Atom Factory, where he now manages stars including John
Legend and Meghan Trainor.
uAtlas Venture, Cambridge, Mass.
uDraper Nexus Ventures, San Mateo, Calif.
Atlas Venture hit its $280 million hard cap for its first
biotechnology-only fund. Atlas technology and healthcare investors said in October they would split into
Draper Nexus Ventures has moved closer to the $125
million offering amount for its next fund, closing on $80.3
million, according to a regulatory filing. The firm reported
fund news
last September that it had closed on $29.3 million for
Draper Nexus Technology Partners II LP. Draper Nexus
invests in technology, energy and industrial companies in
the U.S. and Japan.
uFounders’ Co-op, Seattle
Founders’ Co-op has closed its third and largest fund with
just over $20 million, according to a blog post from cofounder and General Partner Chris DeVore. Founders’ Coop, which launched in 2008 with a $2.5 million fund, focuses
on early- and seed-stage startups in the Pacific Northwest.
The firm’s goal is to help build a regional ecosystem that
can support software and technology businesses that
could eventually develop into large corporations on the
scale of local players Microsoft Corp. and Amazon.com
Inc. In line with this goal, the firm maintains a partnership
with the University of Washington, with the shared goal of
accelerating commercial innovation in the region.
uGreatPoint Ventures, Cambridge, Mass.
GreatPoint Ventures is in the market with a $50 million
offering for GreatPoint Ventures Innovation Fund LP, a
regulatory filing said. The firm, founded in 2004, has backed
companies including waste-to-biofuel maker Coskata
Inc., obesity drugmaker Zafgen Inc. and water-purification
company Oasys Water Inc.
uIlluminate Ventures, Oakland, Calif.
Small, female-led firm Illuminate Ventures is seeking up
to $30 million for its second fund. The firm, founded by
Managing Partner Cindy Padnos, had yet to close on any
of the $30 million offering for Illuminate Ventures II LP as
of early April, the filing said. Its prior fund closed on $20
million in 2013.
uInsight Venture Partners, New York
Insight Venture Partners is in the homestretch of wrapping
up a pair of funds totaling more than $4 billion, according to
people familiar with the funding. In a document distributed
to investors and viewed by Dow Jones, the growth-stage
firm said it gathered $2.9 billion of commitments for Insight
Venture Partners IX LP. That puts the firm well ahead of
the $2.75 billion target it set for Fund IX, and within sight
of its $3 billion hard cap. At $3 billion, Fund IX would be
roughly 15% larger than its predecessor, Insight Venture
Partners VIII LP, a 2013-vintage fund that raised $2.57
billion. People familiar with the offering said a final close is
imminent for Fund IX and a separate fund, Insight Venture
Partners Growth-Buyout Coinvestment Fund LP. It is
unclear what the target is for that vehicle or if it will follow
the same strategy as Insight’s previous co-investment
vehicles, but it has raised about $1.1 billion so far.
uInstitutional Venture Partners, Menlo Park, Calif.
Institutional Venture Partners, the late-stage venture firm
that has backed companies such as Netflix Inc., Twitter Inc.
June 2015
Historical U.S. Fundraising
$285.7
(803)
$300B
$232.6
(640)
250
200
$190.2
(778)
$152.2
(705)
150
100
$96.7
(253)
$99.0
(310)
$166.7
(733)
$172.1
$163.8 (454)
(677)
$129.8
(435)
$77.5
(226)
$70.5
(191)
50
0
YTD-15
(as of 5/15/15)
Raised YTD (B)
$173.6
(630)
Jun-14
Jun-13
Still Open (B)
Jun-12
Total Raised (B)
$46.5
(141)
Jun-11
(No. of Funds)
Amount raised YTD figures in past years reflect the amount raised through late May of the given year. Full-year totals
reflect the amount raised for the full year in any given year. Still open figures reflect the amount and number of funds
we knew were open as of this point in the year for any given year. Source: Dow Jones LP Source
and Snapchat Inc., reached a final close at $1.4 billion on
its latest fund. After launching during the winter with a $1.2
billion target, Institutional Venture Partners XV LP ended up
oversubscribed. At $1.4 billion, IVP’s Fund XV is 40% larger
than its predecessor, which closed with $1 billion in 2012,
and almost twice the size of the firm’s 2010-vintage Fund
XIII, which raised $750 million.
uLongwood Fund, Boston
Longwood Fund, an investor in Flex Pharma Inc., which
went public in January, has filed a $90 million offering for its
third fund. The health-care firm hadn’t closed on any capital
for Longwood Fund III LP as of late April, the regulatory
filing said. Longwood investments include Colorescience
Inc., maker of a line of women’s makeup with sun protection,
and Calithera BioSciences Inc., a cancer-treatment
developer, Dow Jones records show.
uMission Bay Capital, San Francisco
Mission Bay Capital, a seed-stage venture firm investing
in life science companies emerging from the University of
California and the San Francisco Bay Area ecosystem, has
closed MBC Fund II at $25 million, according to a news
release. MBC was created in 2009 by QB3, a University of
California research institute and accelerator.
uMkII Ventures, San Francisco
MkII Ventures, a micro-VC firm founded by San
Francisco investor Ron Palmeri, has decided to focus
on a single portfolio company, Layer Inc., and is raising
a fund through AngelList to invest in Layer apps. Mr.
Palmeri has become chief executive of Layer, which
lets developers add messaging functions to any app,
June 2015
fund news
and the Layer Fund so far has $500,000 committed by
Bloomberg Beta along with undisclosed commitments
from several other investors. Mr. Palmeri launched
MkII Ventures toward the end of 2010 after he helped
dismantle his previous firm, Minor Ventures, which was
forced to shut down after its founder and limited partner,
Halsey Minor, became financially overextended. Mr.
Palmeri bankrolled MkII Ventures himself at first and
then raised an evergreen fund of about $10 million from
investors including Pacific Partners, SV Angel and
Michael Arrington’s Crunchfund.
uMPM Capital, Cambridge, Mass.
MPM Capital, which works closely with pharmaceutical
companies while funding health-care startups, has closed
its new venture fund at $400 million and brought Novartis
AG and Astellas Pharma Inc. in as investors. Novartis and
Astellas are limited partners of MPM BioVentures 2014
LP, which closed May 8. MPM sought $380 million and
capped the fund at $400 million, according to Managing
Director Luke Evnin. The team, which began discussing
the fund with LPs in late 2013, held a first closing in mid2014 and has invested the pool in six startups, he said.
MPM’s new partnership is a jump from its previous fund,
MPM BioVentures V LP, which closed just shy of $275
million in 2010.
rate of return of more than 20%, RiverVest said in a news
release. The firm said it sees many attractive opportunities
in drugs and medical devices and will continue its strategy
of building companies that it can sell in five years or less.
Fund III has backed three companies since its initial close
last year, the firm said.
uSherpaVentures, San Francisco
SherpaVentures is raising up to $175 million for its second
fund, SherpaVentures Fund II LP, according to a regulatory
filing. SherpaVentures, which was founded by two early
backers of car service Uber Technologies Inc., raised $150
million for its first fund.
uSlow Ventures, San Francisco
Slow Ventures, an early-stage investor that originally was
structured as an investment club, has raised a new, $65
million fund. The new fund, Slow 4, came from limited
partners that include technology entrepreneurs and leaders,
and a select set of venture capital firms, according to a
news release. Kevin Colleran is the managing director of the
fund, which includes partners Kevin Colleran, Dave Morin
and Sam Lessin. The four people involved in the fund met
while working at Facebook Inc. Mr. Morin also is the chief
executive of the social network Path Inc.
uRedpoint Ventures, Menlo Park, Calif.
uTrue Ventures, San Francisco
Redpoint Ventures quickly raised its new venture fund
and kept it at its sweet spot of $400 million. The firm’s
sixth fund, Redpoint Ventures VI LP, is the same size
as its prior pool, which closed in 2013 and followed
a similarly sized fund raised in 2009. Redpoint began
rounding up investments earlier this year and received
interest from existing limited partners, Dow Jones earlier
reported. The firm’s portfolio saw four IPOs and six
sales since 2014, with a total market capitalization of
more than $8 billion, said Satish Dharmaraj, a partner
at the firm, in a blog post announcing the fund May 13.
Its portfolio includes companies such as Stripe Inc.
and NextDoor.com Inc., and its now-public companies
include HomeAway Inc., 2U Inc. and Zendesk Inc.
True Ventures has set out to raise up to $175 million for True
Ventures Select I LP, according to a regulatory filing. The firm,
founded in 2005, manages a portfolio including Bandcamp
Inc., Blue Bottle Coffee Co. and Puppet Labs Inc.
uRethink Education, San Francisco
Rethink Education, a venture firm focused on education
technology, is raising $125 million for its second fund,
according to a regulatory filing. As of early May, there were
no commitments to the fund, Rethink Education II LP. The
predecessor fund raised $25 million in 2012, according to
a regulatory filing.
uRiverVest Venture Partners, St. Louis
Life sciences investor RiverVest Venture Partners
announced the final closing of RiverVest Venture Fund III
LP at $80.2 million. The fund is a bit larger than its $75
million predecessor, which the firm wrapped up in 2008
after an initial close in 2006. That fund has a net internal
uWhitecap Venture Partners, Toronto
Canadian early-stage investor Whitecap Venture Partners
has raised 70 million Canadian dollars for a new fund that
partners there hope to turn into a C$100 million fund.
Limited partners in the new fund, Whitecap III LP, include
Bank of Montreal, Kensington Venture Fund and several
family offices. Before raising this capital, Whitecap was an
evergreen fund, investing its own partners’ – but not outside
– money into Canadian startups across three industries:
medical technology, food technology, and information and
communications technology. Whitecap seeks to invest $2
million to $7 million in seed to Series A deals, and to add
follow-on capital of up to $6 million more, up through the
time of an exit. It plans to make its total investment in any
given company as much as $15 million.
Secondary
uLandmark Partners, Simsbury, Conn.
Landmark Partners said it hit the $1.6 billion hard cap
for its latest real estate secondaries fund, amassing one of
the largest global pools of capital dedicated to the space.
The new fund comes as the real estate secondaries market
fund news
finally starts to hit its stride, with volume growing more
than tenfold in the past decade. The final tally for Landmark
Real Estate Fund VII amounts to more than double the
$718 million Landmark raised for a predecessor fund,
which closed in 2011. With backing from limited partners
including Kentucky Teachers’ Retirement System and
Nebraska Investment Council, the firm passed the $1
billion target it set for Fund VII.
June 2015
according to a news release. The majority of Pomona
Investment Fund’s investments will be made through
secondary commitments, with a supplementary focus
on primary and direct deals. Founded in 1994, Pomona
Capital, the private equity platform of Voya Investment
Management, in April held a final close on $1.75 billion
for its latest secondary fund, Pomona Capital VIII LP.
Funds of Funds
uPomona Capital, New York
Pomona Capital is launching Pomona Investment Fund
to give accredited investors easier access to private
investing. The new vehicle, distributed by Voya Investments
Distributor LLC, will have a $25,000 minimum subscription
requirement and an investor-friendly tax reporting structure,
uAltegris, La Jolla, Calif.
The Securities and Exchange Commission in April
approved a new fund that plans to buy stakes in funds
run by Kohlberg Kravis Roberts & Co. The fund will
Recent Disclosed LP Commitments
Limited Partner
Fund
Board of Regents of the
University of Michigan
Athyrium Opportunities Fund II LP
Emergence Capital Partners IV LP
Commitment (M)
$40.0
$15.0
Fund Target (M)
Los Angeles County Employees’
Retirement Association
Blackstone Capital Partners VII LP
$200.0
$16,000.0
Merced County Employees’
Retirement Association
GSO Energy Select Opportunities Fund LP
Taurus Mining Debt Fund
$7.5
$5.0
N/A
N/A
New York State Common
Retirement Fund
TPG Growth III LP
TPG Partners VII LP
Capital Alliance Private Equity IV
PVP Fund I-A LP
$300.0
$250.0
$85.0
$30.0
$3,000.0
$10,000.0
$600.0
N/A
New York State Teachers’
Retirement System
Rhône Partners V LP
ICG Europe Fund VI LP
Thoma Bravo Special Opportunities Fund II LP
€100.0
€70.0
$70.0
Oregon Investment Council
Blackstone Capital Partners VII LP
EnCap Energy Capital Fund X LP
RRJ Capital Master Fund III LP
TPG Specialty Lending Europe Fund I LP
GGV Capital Select LP
Pennsylvania Public School
Employees’ Retirement System
Coller International Partners VII LP
Clearlake Capital Partners IV LP
South Carolina Retirement System
Investment Commission
Blackstone Property Partners LP
South Dakota Retirement System
State of Michigan Retirement Systems
Teachers’ Retirement System
of Louisiana
Apollo Natural Resources Partners II LP
GSO Energy Select Opportunities Fund LP
Vermont Pension Investment Committee
HarbourVest Partners Fund X LP
Virginia Retirement System
TPG Partners VII LP
Oaktree Opportunities Fund X LP/Oaktree Opportunities Fund Xb LP
Blackstone Real Estate Partners VIII LP
KKR Special Situations Fund II LP
Pantheon/VA NRP LP
Penwood Select Industrials Partners IV LP
Gateway Mezzanine Partners II LP
N/A
$335.0*
N/A
$2,500.0
$1,000.0*
up to $500.0
$150.0
$150.0
$100.0
$50.0
$16,000.0
$5,000.0
$4,000.0
N/A
N/A
$100.0
$75.0
$5,000.0
$1,000.0
up to $300.0
N/A
Blackstone Real Estate Partners VIII LP
$300.0
$13,000.0
New Leaf Ventures Partners
TPG Partners VII LP
FS Equity Partners VII LP
Kelso Investment Associates IX LP
Khosla Ventures V LP
Public Pension Capital
Flagship Ventures Fund V LP
Advent Latin American Private Equity Fund VI LP
$150.0
N/A
$150.0
$10,000.0
$100.0
$850.0*
$100.0
$2,500.0
$50.0
$1,000.0
$50.0 N/A (separate account)
$22.0
N/A*
$20.0
$2,000.0*
*Closed. N/A - not available. Source: Compiled by Dow Jones Private Equity Analyst from pension fund disclosures.
$75.0
$75.0
$50.0
$300.0
$200.0
$150.0
$150.0
$100.0
$100.0
$50.0
N/A
N/A
N/A
$10,000.0
$10,000.0/N/A
$13,000.0
$3,000.0
N/A
N/A
N/A*
June 2015
fund news
be managed by alternative investment firm Altegris.
The Altegris KKR Commitments Fund will be available
only to accredited investors. The minimum investment
will be $25,000, a lower threshold than some similar
funds that have launched in recent years. The fund will
charge investors up to 2.6% in annual fees, or $260
per $10,000 invested. Unlike other funds hoping to
lure such investors, the Altegris fund will be able to
advertise and to make information about its performance
available to the public because it had to clear more
regulatory hurdles. KKR has lent its name to the fund,
but it won’t have any role managing it and won’t get a
share of its annual fees. The firm will collect its standard
management fee on the investments the fund makes in
its buyout pools, which is typically between 1% or 2% a
year and a 20% cut of profits above certain levels.
Europe
Buyouts
uKnightsbridge Advisers, Bartlesville, Okla.
uElysian Capital, London
Fund-of-funds investor Knightsbridge Advisers has
closed on $253 million for its eighth venture capital
pool. Knightsbridge Venture Capital VIII LP closed
at its $200 million hard cap, the firm said in a news
release. The $253 million total includes a separate
account and the general partners’ commitment. The
fund will invest predominantly in early-stage venture
capital partnerships that focus on IT and, to a lesser
extent, life sciences and energy technology. In addition,
the fund will make select investments in venture
growth equity and venture capital secondaries.
A firm set up by a founding partner of European
buyout firm Doughty Hanson has reached a first close
on its new fund, according to a person familiar with
the matter. Elysian Capital, a U.K. lower midmarketfocused firm run by Doughty Hanson co-founder Ken
Terry, reached a £180 million first closing for its second
fund in late April, the person said. The fund launched
at the beginning of this year with a £225 million target
and a £250 million hard cap. Elysian closed its £130
million debut fund in September 2010 after launching
fundraising following the start of the financial crisis.
Market Monitor
2014 Funds Through May
New Enterprise Associates ranks as one of the venture capital industry’s most
prodigious fundraisers, and this month is no exception, with the firm closing on
$2.8 billion for its 15th fund, the most the firm has ever raised for a single pool.
A $350 million co-investment vehicle boosts NEA 15’s firepower to $3.15 billion,
exceeding the record $3 billion fund raised by Technology Crossover Ventures in
2007, which was gathered at the height of the venture boom. The new fund also
marks the start of a leadership transition at the firm as Scott Sandell joins NEA
veteran Peter Barris as managing general partners.
Type of Fund
Buyouts/Corporate Finance
Venture Capital
Funds of Funds
Mezzanine
Other Private Equity
Total
Number
Amount* (M)
114
101
22
10
6
253
$69,332.4
$16,518.7
$3,614.2
$1,729.2
$5,480.2
$ 96,674.8
*Totals are rounded to one decimal place.
Top 5 Buyout Funds Closed In Most Recent Month
Fund Name Fund Region
1 ISQ Global Infrastructure Fund LP Global
2 TPG Growth III LP U.S.
3 Equistone Partners Europe Fund V Western Europe
4 Waterland Private Equity Fund VI LP Western Europe
5 Norwest Equity Partners X LP U.S.
Firm Name Location
Total Amt. Raised* (M)
I Squared Capital Advisors New York
$3,000.0
TPG Growth San Francisco
$3,000.0
Equistone Partners Europe London
$2,194.7
Waterland Private Equity Investments Bussum, Netherlands $1,668.4
Norwest Equity Partners Minneapolis
$1,600.0
Target Amt. (M)
$2,000.0
$2,750.0
$2,366.9
$1,512.4
N/A
Top 5 VC Funds Closed In Most Recent Month
Fund Name Fund Region
1 New Enterprise Associates 15 LP U.S.
2 Institutional Venture Partners XV LP U.S.
3 Menlo Ventures XII LP Global
4 MPM BioVentures 2014 LP U.S.
5 Redpoint Venture VI LP U.S.
Firm Name Location
Total Amt. Raised* (M)
New Enterprise Associates Timonium, Md.
$2,800.0
Institutional Venture Partners Menlo Park, Calif.
$1,400.0
Menlo Ventures Menlo Park, Calif.
$400.0
MPM Capital Boston
$400.0
Redpoint Ventures Menlo Park, Calif.
$400.0
Target Amt. (M)
$2,500.0
$1,000.0
$400.0
$380.0
$400.0
April 13 to May 14. *Non-USD amounts converted using exchange rate of the first day of the month of the fund closing and fund offering. Source: Dow Jones LP Source
fund news
uEQT Partners, Stockholm
European firm EQT Partners has set a €6.75 billion hard
cap for a new fund and asked limited partners for additional
time to invest it, according to a letter to investors and a
person with knowledge of the fundraising. EQT initially
targeted €5.25 billion for its latest flagship buyout fund,
but after encountering demand for more than double that
amount, it set the €6.75 billion cap with plans to hold a
closing June 1. It is unclear whether the close will be its
first and final, though one investor said it was likely, given
the demand. If it reaches its hard cap, EQT VII would be
more than 40% larger than its predecessor, EQT VI, which
launched in 2011 and received €4.75 billion in commitments.
uKings Park Capital, London
Kings Park Capital, a private equity firm set up by former
UBS AG bankers, has hit a final close on its second fund.
The firm has raised around £75 million in commitments for
its new fund and a further £10 million for co-investments,
according to co-founder Jason Katz. The firm has been
fundraising since the end of 2013 and hit a final close
on the new vehicle in early April. Kings Park Capital was
set up in 2007 by Mr. Katz and fellow UBS banker Hugo
Robinson, with the pair raising £57.5 million for their first
fund in 2008. The new fund’s investors are mainly high-networth individuals, but the firm also managed secured its first
institutional investor for the fund, said Mr. Katz.
Venture Capital
June 2015
world-wide for investment opportunities. The investment
entity will be overseen by Jean-Pierre Cojan, Safran’s
executive vice president of strategy and transformation.
It will be directed by Grégoire Aladjidi, who has joined
Safran to take this position, and Hélène de Cointet.
Secondary
uMantra Gestion, Paris
Mantra Gestion said it raised €53 million in total capital
commitments so far for Mantra Secondary Opportunities
fund, above the firm’s target of €50 million. The firm in
a news release said it is confident Mantra Secondary
Opportunities, which began fundraising in August,
will hit its hard cap of €75 million. Mantra Secondary
Opportunities will build on the model adopted by the
firm’s Mantra Alternative Private Equity fund of funds,
which began investing in 2011, the firm said. The
secondary fund will buy stakes in closed private equity
funds that focus on intellectual property, life insurance
settlements, litigation funding, technology applied to
water, agribusiness, timber, mining, royalty strategies,
and shipping and aircraft leasing.
Asia
uJoint Polish Investment Fund Management, Warsaw
Joint Polish Investment Fund Management announced
the first closing of its new venture capital fund, Joint
Polish Investment Fund I, at $42 million. It is the first
institutional venture capital fund operating out of Poland
that is completely dedicated to life-science investments,
a news release said. The fund will investment in early and
midstage companies with a close relationship to Poland.
Investment activities will focus on areas with strong growth,
relatively short holding periods and high return potential,
such as companies in the area of medical technology,
enabling technology or mobile health. JPIF I is backed
and supported by the National Centre for Research and
Development, an executive agency of Poland’s Ministry
of Science and Higher Education supporting national
sciences as well as generation innovation policies.
uSafran SA, Paris
French aerospace and defense company Safran SA is
getting into the venture capital game with Safran Corporate
Ventures. The company is setting aside €50 million over the
next three years to fund its venture capital vehicle. Safran
is considering investments in areas such as advanced
materials, robotics, energy production and network sensors,
the company said. The business will initially seek investments
in Europe and North America, though eventually look
uBabson Capital Management, Springfield, Mass.
Babson Capital Management wrapped up fundraising
for its latest Asia-Pacific focused mezzanine fund,
closing on $177.6 million. The fund, Gateway Mezzanine
Partners II LP, will be managed by teams in Sydney
and Hong Kong, and used primarily to invest in private
equity-sponsored transactions across Australia, New
Zealand, Singapore, Japan and Hong Kong. Virginia
Retirement System committed $50 million to the
fund, Dow Jones reported in May. The firm raised
“approximately $100 million” for a predecessor which
closed in 2012, according to a spokesman. Babson’s
private credit platform, which manages more than $29
billion, includes mezzanine and private equity teams
based in the U.S., Europe and the Asia-Pacific region.
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fund news
Venture Capital
uLightspeed Venture Partners, Menlo Park, Calif.
June 2015
Middle East
Lightspeed Venture Partners is raising up to $115 million
for an India-focused fund, Lightspeed India Partners I LLC,
according to a regulatory filing. The firm invests in the U.S.
and internationally and has investment advisers in Silicon
Valley, India, Israel and China. Lightspeed had raised $1.05
billion for its 10th flagship investment fund, Lightspeed
Venture Partners X LP, as of a November regulatory filing.
Latin America
Venture Capital
uEucalyptus Growth Capital, Tel Aviv
New investment firm Eucalyptus Growth Capital plans to
raise $300 million for a fund focused on late-stage Israeli
companies, according to a news release. The partnership,
led by Dadi Permutter, Rami Hadar and Eldad Tamir, will
focus on investing in late-stage Israeli companies as they
head to initial public offerings while creating revenue in the
hundreds of millions of dollars.
uMiddle East Venture Partners, Beirut
Buyouts
uLinzor Capital Partners, Santiago, Chile
After roughly six months on the road, Linzor Capital
Partners closed on $621 million for its latest and largest
pan-regional Latin American private equity fund. Linzor
Capital Partners III LP is a follow-up to Linzor Capital
Partners II LP, a $465 million fund that closed in 2011.
Similar to its predecessors, Fund III will acquire companies
in Latin America, primarily in Mexico, Chile, Peru and
Argentina. The firm typically invests between $20 million
and $85 million in equity capital per deal in companies with
enterprise values between $75 million and $400 million.
Middle East Venture Partners announced the first close
of Middle East Venture Fund II at $15 million. The fund,
which has already made four investments, is the firm’s
fourth fund, succeeding its $70 million Impact Fund,
which launched last year. The new fund aims to close
in the second quarter of this year with commitments
of $30 million. It will invest $500,000 to $3 million in
Middle Eastern technology companies, concentrating
on Web and mobile startups. Mobile communications
company Zain Group is a limited partner. n
Want more detail on these and other fundraisings? Visit our
subscription website at www.privateequityanalyst.com.
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June 2015
deals & exits
LBO Focus
Debt Weighs On Weight Watchers
as Dieters’ Habits Change
By LILLIAN RIZZO
Inc.,
Weight Watchers International
a company devoted
to helping people shed unwanted pounds since the 1960s, is
carrying some weight of its own – about $2.3 billion in debt.
The New York company took on the bulk of that debt thanks
in part to Artal Luxembourg SA, the investment vehicle
of a European family
that initially backed the
company in 1999 via its
private equity investment
adviser Invus Group. The
investment has paid off
Industry
handsomely for Artal and
Weight loss, dieting support
Invus but poses challenges
program
for Weight Watchers as it
Private Equity Owner
fights to adapt to changing
Artal Luxembourg SA, through its
consumer habits.
Weight Watchers
International Inc.
1999
Initial Deal Size
$735 million
Capital Structure
$229.2 million tranche B-1 term
loan maturing in April 2016,
$2.058 billion tranche B-2 term
loan due April 2020; $50 million
undrawn revolving credit facility
due 2018
Fiscal 2014 Revenue
$1.48 billion
Fiscal 2013 Revenue
$1.72 billion
The company is working to gain back customers and expand
its reach among members of the millennial generation, who
have different dieting habits than those of prior generations.
Despite a strong brand, however, these challenges,
combined with an already hefty debt load, have weighed on
the company’s share price and could make one potential
exit route – namely a sale to other private equity investors –
trickier, said analysts, bankers and a private equity executive.
“Unfortunately, the brand
hasn’t been modernized
for a long time and [the
company] is trying to do
that now,” said one analyst
tracking the company.
Weight Watchers was the brainchild of Jean Nidetch, a
Queens, N.Y., housewife who started conducting weightloss meetings in her basement in the early 1960s. In 1963,
she launched the company, which grew quickly throughout
the U.S. More than a decade later, H.J. Heinz Co. bought
Weight Watchers and held it until 1999, when it sold the
company to Artal for $735 million. Heinz maintained a small
stake in the company and still sells Weight Watchers’ and
Smart Ones brand frozen meals.
In 2012, Weight Watchers
completed a $720 million
Dutch auction tender offer
to repurchase a portion
of Artal’s shares at $82
each, forcing the company
to refinance its debt. Artal
still owned 51.9% of
Weight Watchers stock as
of Dec. 31, 2014.
The company’s growth has suffered amid the growing
popularity of digital-based fitness apps, such as Under
Armour Inc.’s MyFitnessPal Inc., as well as the low popularity
of dieting among millennial consumers. More than 25%
of baby boomers, defined as those aged 51 to 69, were
on a diet, compared with only 12% of millennials, or those
aged 18 to 34, as of January 2014, according to research
company NPD Group. Yet, in 2015, the U.S. millennial
population is projected to hit 75.3 million, surpassing the
projected 74.9 million baby boomers, according to NPD.
investment adviser Invus Group
Year of Initial Investment
challenges it faces amid a thinning customer base that has
led to declining sales. Sales in the first quarter were down
21.3% to $322.1 million, compared with the same period
in the prior year. Full year 2014 revenue was approximately
$1.48 billion, dropping 14.2% from $1.72 billion in 2013.
Weight Watchers has struggled with profitability in recent
quarters due to restructuring costs, recording a net loss of
$5.4 million in the first quarter of 2015.
Competitors
As of 2012, the investors
had pocketed $3.8 billion
through a combination of
Source: U.S. Securities and Exchange
dividends and stock sales,
Commission
an exceptionally strong
return on their $224 million
initial equity investment, according to a 2012 report by
Forbes magazine.
Jenny Craig Inc./Curve
International Inc.
Weight Watchers has a debt payment of about $300 million
coming up in 2016 and $2.1 billion due in 2020, according
to filings with the Securities and Exchange Commission.
The company’s heavy debt load exacerbates the
“It’s certainly true that millennials are likely to embrace [doit-yourself] and app-based solutions, at least relative to the
general population,” said Monty Sharma, chief executive of
North Castle Partners-backed Jenny Craig Inc. and Curves
International Inc. in an email. “But everything we’ve seen
suggests that all consumers, whether millennials or not, fall
off these programs quickly after the initial engagement.”
Weight Watchers was somewhat slow to embrace the
digital revolution – although it has been working swiftly to
catch up. In March, the company bought Weilos Inc., an
online social media startup that provides a mobile health
and weight-loss community, for roughly $6.7 million.
deals & exits
June 2015
“Support and tracking weight loss has changed
fundamentally through digital technology,” said
Bruce Cohen, head of retail private equity at global
management consulting firm Kurt Salmon. “Now
maybe a support group needs to be super local, like
meeting at someone’s home, or doing it over webcam,
texting and using social media tools like Instagram.”
The company has started cost-cutting initiatives and
introduced “Expert Chat” and digital coaching platforms.
It also began a partnership with Humana Inc., a health and
wellness company, offering Humana’s employees free and
discounted plans for Weight Watchers. This partnership,
however, won’t significantly impact revenue in 2015,
management said during an earnings call on May 5.
Many of these measures are designed to appeal to a
growing consumer focus on healthy lifestyle habits, such
as eating more nutritious foods and regular exercise,
over dieting, a trend current Chief Executive James R.
Chambers acknowledged during a recent public earnings
call. “As we stated in our last call, the underlying desire for
weight loss is still a very important part of the equation,”
said Mr. Chambers. “However, the consumer wants to
get there through a more holistic mind-set of generally
healthier eating, wellness and fitness, with weight loss
being a critical element of this bigger picture.”
It’s unclear exactly what future plans Artal and Invus have
for Weight Watchers as Invus did not respond to requests
for comment and Weight Watchers declined to comment.
Because Invus invests out of an evergreen structure, it
could conceivably hold its stake in the company for many
years to come and potentially benefit yet again if and when
the company’s performance improves.
Should the firm’s wealthy family backers decide to sell,
however, analysts and at least one private equity executive
point to several factors that could still make Weight Watchers
an attractive target for prospective investors. Most notably,
they point to the company’s strong brand recognition. “The
brand could be worth taking a haircut on the debt and taking
this company private,” said the executive.
Weight Watchers also still generates “a decent amount
of cash flow,” said another analyst who didn’t want to be
named. As of April 4, there was about $211 million in cash
on the balance sheet, following a $60 million early tender
offer to lower debt.
Private equity firms have shown interest in well-known dieting brands. North Castle bought Jenny Craig from Nestlé
SA, combining it with Curves International in 2013. Similar
to Weight Watchers, Jenny Craig is a program that’s
designed to help members lose weight with a support
system. Roark Capital Group has put diet program Atkins
Nutritionals Inc. up for sale, The Wall Street Journal
reported, and MidOcean Partners still owns the South
Beach Diet brand.
Weight Watcher’s stock also has declined significantly,
to $6.19 per share as of May 26, down from $21.58 a
year ago, potentially making it a cheaper buy. Time will tell
whether the company has as much success getting as lean
and mean as the many clients it has helped. “I don’t think
there’s much doubt the Weight Watchers’ program works
and self-dieting does not. But the question is how do you
modernize it?” said the first analyst. n
Weight Watchers Timeline
1961 ..... Jean Nidetch attends obesity clinic and begins holding meetings in basement.
1963 ..... Ms. Nidetch officially launches Weight Watchers.
1978 ..... H.J. Heinz Co. acquires the company.
1999 ..... European family investment vehicle Artal Luxembourg SA acquires the company for
$735 million via investment manager Invus Group.
2012 ..... Weight Watchers conducts a $720 million Dutch auction tender offer with Artal.
2015 ..... Ms. Nidetch dies at age 91.
June 2015
deals & exits
VC Focus
Venture Capital Continues to Flow
Into Chinese Startups
By ANETTE JÖNSSON
Total investment increased by 173% compared with the
first quarter of last year, making this the second most active
quarter since VentureSource began compiling the data in
2006. Dow Jones VentureSource is owned by Dow Jones &
Co., publisher of Private Equity Analyst.
continued to
Venture capital firms
pour money into China
during the first three months of 2015, putting the industry
on course for another banner year.
Investors injected a combined $6.53 billion into venturebacked Chinese companies in the first quarter, which was
down marginally from the record-breaking $6.86 billion
committed in the fourth quarter of 2014 but well above the
historical trend, Dow Jones VentureSource data show. Just
three months into the year, the industry has already invested
40% of the record $16.21 billion it committed to Chinese
startups in 2014.
“It looks like it may be another record year,” driven by a
probable increase in both the number of investments and
the size of individual deals, said Johnny Jiang, an investment
manager with IDG Capital Partners in Hong Kong.
Part of the reason for the increase in activity, he said, is
that several of China’s large listed technology companies,
such as Tencent Holdings Ltd., Baidu Inc. and 360.com,
are now at a stage where they are looking to put excess
capital to work through venture-style investments in small
companies. They are also pushing up prices, he said, which
is contributing to the larger deal sizes.
The number of deals increased to 215, up 56% from the
same period last year, but was down from 270 in the fourth
quarter of 2014, reflecting the increase in deal sizes.
The rise in deal sizes was particularly pronounced in laterstage financing rounds, where the median investment jumped
fourfold to $80 million compared with a year earlier. It was also
more than double the median investment of $34.3 million in
the previous quarter. Overall, the median financing size fell to
$8 million from $9.8 million in the fourth quarter of last year,
but was largely in line with the number for 2014 as a whole.
The largest deal in the first quarter was the $850 million
investment in mid-March into Shanghai Hantao Information
Consultancy Co., which operates online search and city
portal Dianping.com. It was followed by a $700 million round
for Beijing Sankuai Technology Co., which provides online
deals for local goods, services and events through sites
such as Meituan.com; and the $478.7 million committed to
Shanghai Lujiazui International Financial Asset Exchange
Co., a provider of online and mobile platforms for investment
and financing, commonly known as Lufax.
Largest Chinese Deals in First Quarter of 2015
Amount
Raised (M) Investors
Company Name
Headquarters Industry Group
Shanghai Hantao Information
Consultancy Co.
Shanghai
Consumer
Services
$850.0
Hina Group, Temasek Holdings Pvt. Ltd., Wanda Group
Beijing Sankuai Technology Co.
Beijing
Consumer
Services
$700.0
Hillhouse Capital Management
Shanghai Lujiazui International
Financial Asset Exchange Co.
Shanghai
Business &
Financial Services
$478.7
BlackPine Private Equity Partners*, CDH Investments, China
International Capital Corp.
Shanghai Lazasi Information
Technology Co.
Shanghai
Consumer
Services
$350.0
CITIC Private Equity Funds Management, JD.com Inc.,
Sequoia Capital, Shanghai Hantao Information Consultancy Co.,
Tencent Collaboration Fund
Shenzhen Binxun Technology Co.
Shenzhen
Consumer
Services
$200.0
58.com Inc.*, Matrix Management Corp., Sequoia Capital
Youxin Hulian (Beijing)
Information Technology Co.
Beijing
Consumer
Services
$170.0
Baidu Inc., Coatue Management, Kohlberg Kravis Roberts & Co.
Shanghai Qijia Net
Information Technology Co.
Shanghai
Consumer
Services
$160.0
Undisclosed
Beijing Dianfeng Technology Co.
Beijing
Consumer
Services
$110.0
CITIC Capital Holdings, Matrix Management Corp., Morningside
Group (Holdings) Ltd., Renren Inc.*, Sequoia Capital
Beijing Jiufu Times Investment
Consultant Co.
Beijing
Business &
Financial Services
$110.0
Grandis Capital (HK) Ltd., Guangjie PE Fund, IDG Capital
Partners, Incorp Capital, SIG Asia Investment, Union Fortune
*Led round. Source: Dow Jones VentureSource
deals & exits
June 2015
Venture Investment in China Maintains Strong Pace in First Quarter
$8,000M
270
237
300
$6860.5
$6534.8
225
6,000
215
172
4,000
133
117
81
2,000
85
$2469.6
56
$822.0
$537.1 $704.2
0
107
85
$957.6
110
131
128
102
135
116
143
107
93
138
150
$3627.9
$3331.4
90
83
83
$2392.3
$2051.3 $1928.0$2084.9
66
$1731.0 $1660.0
$1552.8
$1500.3
$1454.7
$1419.9
$1278.5
$1181.4
$1136.7 $1118.1
$884.7
$731.0
75
0
1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15
Total Number of Financings
Total Amount Invested (M)
Source: Dow Jones VentureSource
Venture capital firms were particularly fond of the Chinese
consumer services sector, which spawned eight of the top
10 deals and made up 67% of overall investment.
There were 21 venture-backed IPOs in the first
quarter, 50% more than in the fourth quarter of last
year, but below the 27 deals completed in the first
three months of 2014, when the Chinese government
lifted its 15-month moratorium on new listings. The
combined IPO value increased by 31% to $1.7
billion from $1.3 billion in the previous quarter,
but was down from $2.05 billion a year earlier.
Online shopping site providers, such as Sankuai, were a
driving force behind investments into consumer services,
but notably, the vast majority of that capital went into laterstage companies that were already generating revenue. This
suggests venture firms as a group are eager to limit their risks.
Online gaming company Beijing Kunlun Tech Co.
completed the largest VC-backed IPO in the first quarter,
raising $229 million in connection with its listing on the
Shenzhen Stock Exchange’s ChiNext board in mid-January.
“As valuations are getting higher, people are becoming
more cautious about big-scale investments, and companies
with revenue provide more certainty,” IDG’s Mr. Jiang said.
He added that although valuations are looking high at the
moment, “for the right company, there is always room for it
to go even higher as the business grows.”
China-based VC firms also took advantage of the
cheap capital available in the current low-interest-rate
environment to raise $922 million in the first three months
this year, 2.5-times the amount raised in the fourth quarter
of 2014. The fundraising was split between six firms,
compared with nine in the previous quarter. n
IDG Capital was the most active investor in China in the
first three months, with 21 deals, followed by Sequoia
Capital with 18 and Matrix Partners with 13.
Chinese Consumer Services Sector Draws The Most Investment Attention in First Quarter (M)
2012
2013
1Q
2Q
3Q
4Q
Business
and Financial
Services
$221.0
$87.6
$122.7
$107.2
$146.2 $202.0
Consumer
Goods
$279.7 $104.5
N/A
$119.6
$151.5
Consumer
Services
$523.9 $889.7
$524.5 $1,060.5
Energy and
Utilities
$50.2
N/A
$16.2
N/A
Health Care
$27.6
$47.9
$107.9
$30.0
Industrial
Goods &
Materials
$43.2
$55.6
$24.2
$24.0
$129.5 $314.8
$89.2
$113.5
Information
Technology
Source: Dow Jones VentureSource
1Q
2Q
$31.4
$300.8 $519.7
N/A
2014
3Q
2015
4Q
1Q
2Q
3Q
$52.4 $346.6
$243.3
$526.4
$412.0
$43.2
$148.3
$32.6
$3.5
$33.8
4Q
1Q
$435.2 $1,345.9
$58.2
$52.5
$1,042.0 $846.2 $1,498.4 $2,270.7 $2,219.8 $3,759.3 $4,409.5
N/A
$17.2
$10.2
N/A
N/A
$10.2
N/A
N/A
$4.8 $166.3
$100.8
$38.9
$78.9
$181.1
$89.1
$231.5
$183.5
$4.8
N/A
$4.5
$3.0
$32.1
$23.3
$16.6
$331.3 $144.2
$524.1
$495.2
$525.7 $2,311.0
$523.6
$25.7
$62.1
$102.0 $200.0
June 2015
people
Rising Stars
Deal Makers Dominate Europe’s
Under-40 Rising Stars
With private equity exits reaching their highest levels on record, deal makers have returned to the
fore in the industry. With that in mind, our U.K. sister publication Private Equity News has selected
40 of the most influential European private equity executives under the age of 40. The list includes
executives who have navigated portfolio companies through sales and initial public offerings,
generating strong returns for their firms, as well as people who have come up with innovative and
groundbreaking financing structures to support portfolio companies. Below we feature six of PEN’s
“40 Under 40 Rising Stars” profiles.
LUCIAN SCHÖNEFELDER
Director, Private Equity, Kohlberg
Kravis Roberts & Co.
Lucian Schönefelder is viewed by
some of his peers as a future leader
at Kohlberg Kravis Roberts & Co. In
2014, the London-based martial arts
enthusiast who specializes in Krav Maga
– a form of self-defense developed for
the Israeli military – was tasked with
establishing the European arm of KKR’s new growth equity
business. Investing in technology companies seeking global
expansion and with around $500 million at his disposal,
Mr. Schönefelder has overseen the $50 million acquisition
of a minority stake in IT software firm Arago GmbH and
led its $30 million investment in Israeli Internet business
ClickTale Ltd. A director in KKR’s technology, media and
telecommunications team since 2013, he has completed
deals worth $1.9 billion in the past 12 months. The Germanborn Mr. Schönefelder started out in J.P. Morgan’s mergers
and acquisitions unit in London in 2004 before joining KKR
in 2007. He was promoted to principal in 2009. Outside of
work, he is developing an online platform to connect charity
donors and volunteers with nonprofit organizations.
CRISTINA HENRIK
Principal,
Boston Consulting Group
Cristina Henrik is described by
colleagues as a “powerhouse” of
Boston Consulting Group’s private
equity practice in London, which she
helped build since joining as a founding
member in 2009. The team has since
quadrupled in size and Ms. Henrik,
who has advised on 25 due diligence processes on deals
between £200 million and £2 billion over six years, was
promoted to principal in 2014. Her career as an analyst,
investment manager and consultant has set Ms. Henrik
apart from her peers, with deals experience spanning
the consumer goods, technology, telecommunications,
payments, business services, education and industrial
goods sectors. After six years at Eastern European private
equity firm Plasmass International specializing in packaging
materials and a stint at Banco Santander SA’s infrastructure
private equity fund, she switched to consultancy at OC&C
Strategy Consultants and then took a job at BCG. Ms.
Henrik speaks four languages and became the first
Romanian national to receive an M.B.A. at Dartmouth
College’s Tuck School of Business in 2008. She is coauthoring a BCG research paper on minority investment,
which will be published later in 2015.
ANDY DAWSON
Managing Director,
Advent International
Andy Dawson has been building his
reputation and relationships in the
consumer and retail sector, working
on many of Advent International’s
highest-profile deals ahead of his
promotion to managing director in
December. He is a director at U.K.
retailer DFS Trading Ltd., which Advent bought in 2010 for
£500 million, and floated on the London Stock Exchange in
March 2014, raising £98 million and valuing DFS at £543.2
million. Mr. Dawson also worked on deals to buy an $845
million stake in Canadian sportswear brand Lululemon
Athletica Inc., in 2014. He joined Advent as an associate
in 2004, and is recognized for “technical and analytical
skills that complement his ability to motivate and encourage
people,” according to a lawyer.
people
JUERGEN PINKER
Managing Director,
Blackstone Group
German-born Juergen Pinker was
promoted to managing director in
Blackstone Group’s London office in
late 2013 and has been leading the firm’s
investment strategies in Germany as well
as in European industrials, chemicals
and logistics. He oversaw Blackstone’s
acquisition, alongside Hellman & Friedman, of a 70% stake
in the German classified advertisement business Scout24
Holding GmbH for around €1.5 billion. The deal, completed in
February 2014, was Germany’s largest buyout in 12 months.
Mr. Pinker also led the acquisition of corporate services
provider Intertrust Group in early 2013 and its subsequent
merger with European fiduciary manager ATC Group, which
Blackstone bought in mid-2013 from HgCapital for €303
million. He started his career in the industrials sector covering
German buyouts for Carlyle Group in 2001, relocating to
London in 2007 to cover European industrials and chemicals.
By 2009, Mr. Pinker, who speaks Japanese, had moved to
distressed debt specialist Strategic Value Partners before
joining Blackstone in 2011.
MALCOLM COFFIN
Investment Director,
Inflexion Private Equity
Manchester, England-based Malcolm
Coffin has had a busy 12 months.
Asked by Inflexion Private Equity
Managing Partners John Hartz and
Simon Turner in early 2014 to lead
the firm’s dual fundraising for the
Inflexion Buyout Fund IV and Inflexion
June 2015
Partnership Capital Fund I, Mr. Coffin spent much of
the year liaising with investors across the U.S., Europe,
the Middle East and Asia. Within five months of their
launch in May, both funds closed after having secured
a combined £1.05 billion. Mr. Coffin is also responsible
for sourcing and managing Inflexion’s investments in
the north of England, a role he has held since mid2013, and includes joint oversight of the firm’s eightstrong back-office function in Brazil, India and China.
The marathon runner began his career at consultancy
Deloitte LLP in London in 2002, moving to the mergers
and acquisitions team within N M Rothschild & Sons
Ltd.’s banking group in 2005. He joined Inflexion as an
investment executive in 2007, before a promotion to
assistant director in 2009.
CHRISTOF RATJEN
Principal, Nordic Capital
London-based Christof Ratjen
joined Nordic Capital in 2011 after
seven years executing leveraged
finance deals at Barclays Capital.
He was made principal at the
buyout firm at the beginning of
2015 following a stellar 2014,
when he executed €2.7 billion
worth of financings for its portfolio companies. This
included a €350 million package for German healthcare group GHD GesundHeits GmbH, which was
the first-ever loan with U.S.-style documentation for
a European company with no U.S. exposure. He was
also responsible for Norwegian debt collection group
Lindorff Group AB carrying out a €1.5 billion debt
package, which was the largest ever European financial
institutions-related high-yield bond deal. Mr. Ratjen
says his year of German military service prepared
him for the sometimes “brutal” hours of finance. n
June 2015
people
A Private Word With David Wilton
private
Emerging markets
equity veteran David
Wilton joined Morgan Stanley Alternative
David Wilton
– Masters of
Commerce from
the University
of Canterbury,
New Zealand
– Serves as chairman
of the advisory council
for the Emerging
Markets Private
Equity Association
and was a member
of the International
Development
Working Group
of the G8 Impact
Investing Task Force
Investment Partners as a managing director
in 2014. Before that, he served as chief
investment officer at the International Finance
Corp., where he oversaw some $400 million
to $500 million in annual commitments to
emerging markets private equity funds.
missing piece of the puzzle is quite likely to be
seen by someone approaching the issue from a
different background.
Q: What personal faults do you have the
least tolerance for in others?
A: Lack of transparency. I play with all the cards
on the table and get very irritated with those
who play with cards concealed under the table.
Q: What personal quality has helped
you the most in your career?
Q: Other than private equity, what job
(or career) would you most like to try?
A: Curiosity to understand how things work,
not being too concerned what other people
think and skepticism of the herd. I am not a
fan of groupthink.
A: I find private equity, particularly the growth
equity and VC parts of the spectrum and
emerging markets, endlessly interesting. I can’t
think of anything that would get me up in the
morning with a greater spring in my step. Other
things that interest me such as art, design and
gardening are hobbies and nothing that I would
like to pursue as a career.
Q: What is one thing that people might
be surprised to know about you?
A: I was for a short time the silent partner in
an art gallery, my souvenir of which is a very
nice Mark Flood lace painting.
Q: If you had to describe your work style in
three words, which ones would you choose?
Q: What is your idea of misery?
A: Think. Rush. Pause. (repeat)
A: Treading water without any idea of the
way forward. There is always something
new – a concept, a discovery, a tide in the
affairs of the world. If you are simply floating
without seeing a new direction to investigate,
something is wrong.
Q: What is your greatest regret?
Q: What is one of the most influential
books that you’ve read and why?
A: Kenichi Ohmae’s The Mind of the
Strategist. I read it decades ago and it
changed my perspective on business from
numbers to a dynamic, organic thing.
Q: What quality (or qualities) do you most
appreciate in a friend or colleague?
A: Knowing things I do not know and sharing
and articulating them well. A room full of people
who all know the same thing is both dull and
dangerous. The world is large and complex
and the only way to obtain even a modest grip
on it is different experience and knowledge in
the room. My experience is that even in your
own field of expertise – where you have most
of the picture and where you are least likely to
seek advice – it pays to get other views, as the
A: Not learning a language closely followed by
not learning an instrument. As a child in New
Zealand, there seemed to be little need to speak
anything but English, and despite strong encouragement from my parents, I never saw the point
in putting much effort into language classes. Big
mistake from taking too narrow a view.
Q: If you had to choose a personal motto,
what would it be?
A: The one we have: Qui Volunt Valent.
Those who have the will have the ability.
Determination counts for a lot.
Q: If you’re life had a soundtrack to it, what
would the title song be?
A: Either Miles Davis’s “So What” or Michel
Legrand’s version of “My Funny Valentine,”
which sounds nothing like the regular version.
Whenever I am on holiday, Miles Davis is the
first thing in the CD player and when “So What”
comes on, the holiday is officially started. n
–Compiled by Laura Kreutzer
FIVE, TEN, FIFTEEN, TWENTY…
A junior capital provider must have more than just money to help their partners close a deal; they must also have experience and
expertise. Non-sponsored and independently-sponsored middle-market transactions especially require an investor with an extensive
background managing the many unique issues these deals often encounter. Peninsula Capital Partners has this experience, with
a 20-year history of focusing on such deals and with well over 100 closed transactions. Founded in 1995, we were among the
first firms with this unique market focus, and we have not deviated from it. Our approach is to understand the sensitivities
and goals of our transaction partners and provide them a tailor-made, junior-capital solution, either as a control or non-control
investor. This depth of experience is our greatest asset; one that we would like to share with you on your next transaction.
Please call us to discuss how we may help you close your next deal. We’ve got experience to burn.
PLEASE ALLOW US TO SHARE OUR CAPITAL STRUCTURING EXPERTISE WITH YOU — 313.237.5100 | WWW.PENINSULAFUNDS.COM
The Private Fund Group—Selected Fundraisings
November 2014
August 2014
$400,000,000
$4,131,250,000
SEK 12,120,000,000
$3,560,000,000
Yukon Capital
Partners II
New Mountain
Partners IV
Proventus Capital
Partners III
CCMP Capital
Investors III
Exclusive Placement
Agent
October 2014
$704,294,348
$325,000,000
York Special
Opportunities Fund II
ElmTree Net Lease
Fund II
Advisor and
Placement Agent
June 2014
$400,000,000
Cypress Acquisition
Partners
Retail Fund, L.P.
June 2014
March 2014
Exclusive Placement
Agent
May 2014
June 2013
Exclusive Advisor
and Placement Agent
September 2014
Advisor and
Placement Agent
$4,080,000,000
The Energy & Minerals
Group Fund III, LP
Amerimar Enterprises,
Inc.
March 2014
Exclusive Advisor/
Single Asset Joint Venture
June 2014
Exclusive Placement
Agent
$5,150,000,000
$154,300,000
$1,900,000,000
Onex Partners IV LP
Greenstone Resources
L.P.
HitecVision VII
Exclusive Advisor
April 2014
Exclusive Placement
Advisor
April 2014
Exclusive Advisor
and Placement Agent
€2,276,000,000
$496,000,000
$2,435,000,000
$3,850,000,000
Intervale Capital
Fund III, L.P.
Pine Brook Capital
Partners II, L.P.
GTCR Fund XI
Placement Agent
Exclusive Advisor
and Placement Agent
Exclusive Placement
Agent
February 2014
Orion European
Real Estate Fund, C.V.
October 2013
Advisor
October 2014
Hayfin Direct Lending
Fund LP
€1,300,000,000
November 2013
Placement Agent
Exclusive Advisor
November 2013
February 2014
January 2014
Advisor and
Placement Agent
$6,000,000,000
$2,677,000,000
€210,612,666
Energy Fund XVI, L.P.
MBK Partners
Fund III, L.P.
AAC Capital Benelux
Fund III, C.V.
Advisor and
Placement Agent
November 2013
Advisor and Exclusive
Placement Agent
October 2013
Lead Placement Agent
$50,000,000
$3,438,000,000
€1,356,000,000
$1,300,000,000
FMJM RWL LLC
Crescent Mezzanine
Partners VI, L.P.
HayFin Special
Opportunities
Credit Fund, L.P.
Sentinel Capital
Partners V, L.P.
Residential Whole Loan
Separate Account
July 2013
Advisor
July 2013
Exclusive
Placement Agent
€5,328,000,000
£2,000,000,000
$1,600,000,000
The fifth Cinven
Fund, L.P.
HgCapital 7, L.P.
Marlin Equity IV, L.P.
Advisor
April 2013
Placement Agent
2013
July 2013
Exclusive Private
Placement Advisor
Advisor and
Exclusive Placement Agent
The Private Fund Group—Selected Secondary Transactions
$182,353,969
$268,312,110
$125,840,000
$1,085,000,000
Project
Cantata
Manager sponsored
RE asset sale
Project
Lynx
Fund restructuring with
primary staple
Project
Skywalker
Fund restructuring with
primary staple
Project
Bumper
Manager sponsored
sale of direct PE assets
with primary staple
November 2014
Exclusive Advisor
November 2014
Exclusive Advisor
November 2014
Exclusive Advisor
September 2014
Exclusive Placement Advisor
Project
Flight
Sale of an infrastructure
private equity fund interest
Project
Chorus
Sale of a portfolio of private
equity fund interests
Project
Aria
Manager sponsored sale
of direct PE assets
with primary staple
Project
Hawk
Manager sponsored sale of
hedge fund LP interests
September 2014
Exclusive Advisor
August 2014
Exclusive Advisor
June 2014
Exclusive Placement Agent
June 2014
Exclusive Advisor
$356,052,915
$208,891,553
$495,000,000
$170,000,000
Delivering excellence. Exceeding client expectations.
The Private Fund Group credit-suisse.com
PEA Deals BW 7.25 x 10.indd 1
2/17/15 1:03 PM

Smallest - Dow Jones

Transcription

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