AW Monthly for December: Investors find alternatives to market uncertainty
With the U.S. stock market down roughly 7% for the year-to-date, it comes as no surprise that investors continue to allocate to private markets as a way to find some refuge over longer time frames to obtain positive performance.
Making headlines in November outside of the FTX crypto contagion is the $443 billion California Public Employees Retirement System's structural changes to its private markets investment programs. The aim is to grow the pension fund's private equity portfolio by roughly $22 billion.
The announced move comes at a time when private equity firms have already raised billions with alternative investment firms collecting $71 billion in fund closures last month.
Our estimates show assets raised in November decreased from the prior month, but we still tracked in our?AW Deal Watch?roughly $36 billion in capital being put to work in equity, debt, real estate and infrastructure deals around the globe.?
We expect more capital to continue to be put to work as dry powder approaches historic levels. This meets the needs of allocators to get back to the black before 2022 ends.
Susan Barreto
Editor,?Alternatives Watch
News
Sixth Street closes on $4.4bn for growth investing
Sixth Street has added another $4.4 billion to its platform with an aim to invest in growth companies.
The $60 billion firm said its Sixth Street Growth targets investments in late- and mid-stage growth companies and has invested over $9 billion in more than 70 companies through its Growth franchise since inception.
HarbourVest raises $4.2bn for sixth fund
Boston-based HarbourVest Partners just closed its sixth co-investment fund at $4.2 billion in capital, including the commitment from the GP.
Originally targeting $3.5 billion, HarbourVest Partners Co-Investment Fund VI is set to invest in a diversified portfolio of direct co-investments in buyout, growth equity and other private markets transactions, officials said in an announcement. The co-investment deals will be alongside top-tier private markets managers. Investments will be made in companies located primarily in North America, Europe, Asia Pacific, and select emerging markets.
‘Red flags’: Carson Block’s Muddy Waters takes aim at dLocal
Muddy Waters Capital has taken a major short position in dLocal, a Uruguay-headquartered payments processing company, the hedge fund firm’s founder and CIO Carson Block said on Wednesday, citing a series of “red flags” in the company’s most recently published accounts.
In a rare appearance in London at this year’s Sohn conference, Block — who has burnished his reputation with a trenchant activist-style approach to shorting, particularly against Chinese firms — laid out his bet against the Montevideo-based company in an in-depth investment presentation.
Features
Direct lender Stellus leans into PE-backed success
The investment team at Stellus Capital Management is always on the lookout for a good growth story. It isn’t that often that they have the opportunity to share their own growth story — one that helps inform a long track record and unparalleled relationships built over almost two decades of loan origination.
A $2.8 billion credit shop, Stellus finds itself gaining momentum investing in lower middle market debt — a space where they are often the only lender at the table with the experience and know-how to best support a management team’s aims.
Moonfare: Retail PE investors doubling down despite recession fears
Leading digital private markets platform Moonfare found in a recent survey of individual investors that roughly 83% intend to increase their investment in private equity over the next 12 months.
The findings are from a survey conducted in September of 244 Moonfare investors. Private equity comes into focus as 77% of investors said they predict their investments will meet expectations and 8% expect their investments to exceed their expectations. These figures are despite the fact that 67% said they were preparing for a recession.
Briarcliffe tracks new vistas in the private credit landscape
Briarcliffe may not even be two years old yet, but its team is at the heart of one of the biggest investment opportunities being embraced by institutional investors today.
To date, Robert Molina, Briarcliffe’s head of origination, has met with 360 general partners, and of that grouping the team at the placement agency has drilled down to focus on serving eight private credit firms since 2021. Chances are high that their client numbers are set to grow in the months and years to come as investor appetites evolve with the higher interest rate environment.
Investors
CalPERS restructures private markets investment programs
The California Public Employees Retirement System with approximately $443 billion in assets under management, has made changes to the structure of two of its private markets investment programs, with management of its recently created growth and innovation program consolidated with the private equity asset class, according to an announcement from the system.
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Private equity will now be led by Anton Orlich, who was?appointed last month?as managing investment director for growth & innovation. In combining the two programs, Orlich will succeed Greg Ruiz, who recently left his role with CalPERS’ private equity team for employment in the private sector.
Florida SBA’s Q3 alts commitments slow vs. Q2
The State Board of Administration of Florida (SBA) made approximately $1.5 billion in new commitments to managers of alternative investment classes in the third quarter, compared with?$1.7 billion in investment commitments in Q2.
SBA, which manages approximately $240 billion, made 17 new investment commitments to 15 managers during the quarter, including commitments to five new managers to SBA’s roster, representing fresh capital allocations to its global equity, private equity, real estate and strategic investments asset classes.
Connecticut places another $1bn-plus into private markets
At last week’s meeting of Connecticut’s Investment Advisory Committee (IAC), Connecticut State Treasurer Shawn Wooden announced an additional $1.13 billion in approved investment commitments for the $43 billion Connecticut Retirement Plans and Trust Funds (CRPTF).?
In the CRPTF’s private investment portfolio, Wooden committed $125 million to Bregal Sagemount Fund IV. And in its private credit portfolio, he approved commitments of $100 million to Vistria Structured Credit Fund I, $300 million to SLR Capital-CRPTF Credit Partnership, and $100 million to Centre Lane Credit Partners III.
People
CalPERS welcomes new high-growth investment leader, preps search for new PE head
The California Public Employees Retirement System (CalPERS) hired Anton Orlich as a managing investment director (MID) for growth & innovation, a newly created position that will be responsible for developing strategies and investment deals focused on higher growth, higher risk and reward opportunities.
CalPERS, the nation’s largest public employees’ retirement plan with about $431 billion in assets under management, also announced yesterday that Greg Ruiz, its MID for private equity, will be departing the pension fund next month for a position at Jasper Ridge Partners, a Fort Worth, Tex.-based investment management company.
Atalaya hires for specialty finance
Atalaya Capital Management added Bharath Subramanian as a managing director in the firm’s special finance practice.
The New York City-based practice is focused on lending to consumer finance, commercial finance and other financial services businesses. In this role, Subramanian plans to work closely with the existing investment team to source and execute a broad range of structured capital solutions, including asset financings, portfolio purchases, corporate level debt solutions and equity transactions.
Aksia adds to private credit team
Aksia has added private credit specialists to its New York and London offices as it seeks to strengthen its private credit platform.
Tod Trabocco has joined the New York office as a managing director, private credit strategies, reporting to Tim Nest, who heads the private credit research team, and Patrick Adelsbach, co-head of advisory in the Americas. Previously Trabocco was head of product and strategy at Industrial Transportation Equipment Management. Prior to that role, he was head of private credit research and manager selection at Cambridge Associates where he chaired the credit investment committee.
Research
EY Survey: Investors still set to increase alts allocations with private credit mandates
About 70% of investors expect a global recession over the next 12 months, but that has yet to hamper demand to either hold alternative allocations steady at their current level or grow them further in the years to come, according to the 2022 EY Global Alternative Fund Survey.
In the next three years, but of those expecting to increase their alternative asset exposure roughly 51% said they plan on adding on to private credit. According to EY this illustrates that many investors believe that this period of rising interest rates and deteriorating economic conditions will create a credit cycle that allows for interesting and lucrative investment opportunities in the space. Real estate (29%) and private equity (28%) were runners-up as only 9% of investors planned to increase their allocations to hedge funds.
Alts managers collect over $71bn in October
Alternative asset managers continued to collect fresh capital to close on over $71 billion assets across over 30 funds over the course of the month of October in the latest?Alternatives Watch?Research?Manager Scorecard.
The largest fund close was Churchill Capital’s latest lending fund that saw $12 billion in inflows, but it was a slow month for credit funds over all that saw only $13 billion in fresh capital overall.
PE remains remarkably resilient, asset growth slows but still positive
Our?AW Research?analysis of private equity performance shows that large public private equity companies’ funds have shown remarkable resilience across all of their fund categories.
Reviewing?Carlyle?and?Ares Management‘s fund performance, one might wonder if there had been any public equity and public bond drawdown year to date.?Even the small negative marks for?Blackstone,?KKR?and?Apollo?for 3Q fund performance show impressive stability.?As show below, Carlyle’s traditional funds have yet to show any negative quarterly fund performance in 2022.?Only Carlyle’s liquid credit fund category has one quarter of negative fund performance.