H/Advisors Private Capital Wrap-Up 31 May
WORTH A READ
?Europe
Jamie Dimon, CEO of JPMorgan Chase, has sounded a warning bell about potential risks in the $1.7 trillion private credit market. He reflects wider market scrutiny on the rapidly growing private credit industry, especially as retail investors increasingly gain exposure to these less liquid products. Dimon expressed concern about allowing retail clients access to riskier private credit investments, noting they tend to escalate complaints to regulators when facing losses.
Higher interest rates and sluggish IPO markets are beginning to bite and are making it harder to return cash to investors and in turn raise capital. As Brooke Masters writes in FT’s Lex, private equity firms are now rethinking their approach to generate strong returns. Many are turning to employee share ownership schemes as a way to motivate workers and drive operational improvements at portfolio companies. While employee ownership is no panacea, PE firms hope harnessing insights from engaged profit-sharing employees can uncover inefficiencies and opportunities in a way top-down management changes cannot.
The lack of exits and distributions from private equity funds is constraining institutional investors' ability to allocate capital to new investments, including hedge funds. As private equity firms struggle to return cash to investors, it is creating a "knock-on effect" where allocators pause new commitments to illiquid funds and reduce investments in more liquid hedge funds.
United States
Despite talks of a rebound in the private equity industry following a two-year dealmaking slumber, hiring remains slow according to WSJ Pro Private Equity’s Chris Cumming. Recruiters who work in the field note that “many firms are overstaffed relative to the slow pace of deals and fundraising,” including Anthony Keizner, co-founder of executive recruiter Odyssey Search Partners, who told WSJ Pro that "hiring is still slow in private equity, and the sense of malaise is still in place.”
Private equity’s backlog of assets is catching up to the industry, reports Axios’ Michael Flaherty. According to Bain & Co., firms are sitting on $3.2 trillion worth of unsold assets and exits are few and far between. Hamilton Lane co-CEO Erik Hirsch told an audience this week that "I think you have GPs in love with assets. If they own a great business that's compounding at double digits, they're reticent to sell it.”
Recent dealmaking has led to highly concentrated private-equity owned healthcare practices resulting in significantly less competition – and in some cases, the closure of vital health facilities, writes The Wall Street Journal’s David Wainer. The article that when private equity gets involved across the healthcare industry – including emergency care, anesthesiology, and nursing homes, for instance – prices have tended to increase for patients as opportunities for negotiations between insurers and medical providers are limited by the lack of competition.
WALL OF MONEY
领英推荐
Goldman Sachs Asset Management’s alternative investment platform raised more than $20bn for senior direct lending in its latest fund targeting private equity-backed global businesses.
Fund IV will make equity investments between €75m and €300m to support regional and global mid-sized companies across software, industrial technology, business services and healthcare.
AGF III is already nearly 25% deployed, following investments in dialysis solutions provider Théradial, snacking concept firm My Pie, and pharmacy banner company Aprium Pharmacie.
DEAL CHART
MEDIA OF THE WEEK
Anthony Diamandakis, global head of global asset managers at Citi, says private equity markets are in a new elevated normal in dealmaking and expects activity to pick up in the next several years. He spoke on May 29 on "Bloomberg Brief."
MOVERS AND SHAKERS ??
Abrdn chief executive Stephen Bird quits after four years amid turbulent time for the fund giant. The former Citi executive is handing over to chief financial officer Jason Windsor on an interim basis.
Francesca Collins has been appointed director at OMERS Infrastructure in the firm’s strategic partnerships team. Collins will be responsible for the developing and implementing the investor relations strategy for the firm’s third-party capital platform
Starwood Capital has named Matt Smith as managing director, head of U.S. residential asset management.
FROM THE HORSE’S MOUTH
“Do you want to give access to retail clients on some of these less liquid products? Well the answer is — probably, but don’t act like there’s no risk with that.” – Jamie Dimon, CEO of JPMorgan Chase
“What you are seeing is a failure to exit on the private equities, and it’s kind of having this follow on effect where its leading to a lower velocity of capital flowing throughout all alternatives. It’s becoming a real issue.” - Sam Diedrich, a managing director at Partners Capital
“I gravitate towards gravitas.” – Morgan Freeman, Actor, born on the 1st June 1937
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