December 2020/January 2021 • privateequityinternational.com EXTRA The Emerging Markets Guide
Going it alone How to start your own firm The Debevoise Private Equity Group continues to “Dominant global private for decades. With consistently high rankings from PEI, Chambers equity practice & Partners, and The Legal 500 with experience recognized leader for more than 40 years. advising a 3 comprehensive range of clients” Chambers Global www.debevoise.com Contents
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Senior Editor, Private Equity, Americas Isobel Markham [email protected], +1 646 380 6194 Senior Editor, Private Equity, EMEA Adam Le ISSN 1474–8800 • ISSUE 191 • DECEMBER 2020/JANUARY 2021 [email protected], +44 20 7566 5437 Senior Special Projects Editor Graeme Kerr [email protected], +44 20 3862 7491 Special Projects Editor Louise Fordham Insight Cover story [email protected], +44 20 7566 5440 Senior Reporters Carmela Mendoza 18 [email protected], +44 203 640 7512 2 Rod James Diversity Emerging managers will How to spin out [email protected], +44 20 7566 5453 bear the brunt of flight to familiarity Senior Reporter – Asia The pandemic has left many Alex Lynn Climate change Will the US wondering whether they could [email protected], +852 3704 4638 take the lead? 4 garner better economics by setting Contributors up their own funds. We spoke Bruno Alves, Amy Carroll, Claire Coe Smith, Ben Jackson, Karl Shmavonian, Rebecca Szkutak LP Watch AP7 preps for alts boost 4 to 21 market sources involved in successful spin-outs about leaving Managing Editor, Production: Mike Simlett China Merchants Capital The largest Production Editors: Daniel Blackburn, an established franchise and starting Adam Koppeser PE firm you’ve never heard of 6 anew Copy Editors: Eric Fish, Nicholas Manderson Retail investors Partners Group and Art Director: Mike Scorer UBS Wealth’s tie-up 10 EMERGING MARKETS GUIDE Head of Design: Miriam Vysna Senior Designer: Lee Southey Fundraising Capital concentrates 12 Designers: Denise Berjak, Pio Blanco Covid-19 What PE pros learned 14 Head of Marketing Solutions, 27 Private Equity Group: Continuation funds Get ‘em while Alistair Robinson How to get a deal done during [email protected], +44 20 7566 5454 they’re hot 15 Subscriptions and reprints a downturn 28 [email protected] EDITOR’S LETTER 16 Customer Service Due diligence in Africa 30 [email protected] Editorial Director, US: Rich Melville LatAm HNWIs are waiting for the Editorial Director: Philip Borel Analysis recovery 31 Director, Product: Amanda Janis Director of Research and Analytics: Dan Gunner DFIs: Picking up the pieces 32 Managing Director, Americas: Colm Gilmore 44 Managing Director, Asia: Chris Petersen Gulf Capital: Building global Chief Commercial Officer: Paul McLean leaders across growth markets 34 Chief Executive: Tim McLoughlin VC to benefit from Middle East diplomacy changes 37
Baltic GPs bet on regional play 38
Myanmar’s PE firms hope to win local hearts and minds 39
Germany roundtable Mittelstand Covid-19 calms Vietnam’s feeding deals, venture and corporate carve- For subscription information visit frenzy 40 privateequityinternational.com outs are all poised to accelerate, but sourcing remains challenging in a China’s boost for secondaries 42 covid-19 environment Q&A: EMPEA 43 And finally Life in quarantine 52
December 2020/January 2021 • Private Equity International 1 iversity has been Diversity and fundraising a recurring topic in the private Emerging managers will bear the equity industry, and the pandemic brunt of a flight to familiarity and racial justice Dmovement in the US this year have added urgency to the issue, writes of industry affairs of the Institutional LPs would seek safer options to Carmela Mendoza. Limited Partners Association, told an present to their internal investment Against this backdrop, Private investment summit in September committees and boards. Equity International fundraising data that this flight to familiarity – LPs Paradoxically, blue-chip GPs show capital is being concentrated focusing on re-ups with managers upping their game on diversity in the hands of ever fewer managers. they had relationships with before could make it even harder for Of the $369.2 billion of private the crisis – was the latest risk investors diverse managers to attract new equity, real estate and infrastructure would face and that opportunities relationships. Carlyle Group has set a commitments that closed in the first could be overlooked. goal of achieving 30 percent board half of the year, less than 3 percent At PEI’s Women in Private Equity diversity in its companies by 2023. was committed to firms raising their Forum in November, panellists In June, KKR co-chief executive first- or second-time funds. Only noted that a pandemic-altered Henry Kravis said 80 percent of its 16 percent of the 486 investment environment had made it harder companies had at least two board vehicles that held final closes in H1 for diverse managers to attract new directors with diverse backgrounds, are managed by new firms. investors. Anamica Broetz, head a goal it had set several years ago. Jennifer Choi, managing director of investor relations at DWS, said An LP that needs to meet its
New managers only accounted for 16% of PE funds raised in H1
Total number of funds raised in H1 2020 Percentage of funds raised by new managers 0 50 100 150 200 250 0 10 20 30 40 50
Private equity Private equity
Real estate Real estate
Infrastructure Infrastructure
Source: PEI
2 Private Equity International • December 2020/January 2021 the road. this could be a costly decision down and diverse managers at a time like they know well. But ignoring new LPs to double down on managers vintage years studied. benchmarks in 78.6 percent of the performed better than industry 1994 and 2018 were shown to have Grosvenor study, thediversePEfundsthat owned managers pays off. In a 2019 that investingindiverseorwomen- managers. Research has shown troubling state of affairs for diverse All this leads to a potentially Better returns return.” easiest the not return, investor to make the best possible our clients and the onus is on the paid to choose the best funds for be taking the easy route. We are consultancy. “As an LP you shouldn’t private equity, at an investment my spine,” Europe, saysthehead of appear the saferfinancialchoice. teams. The latter option can often leadership, deal teams and operating focusing on creating diverse established manager that is already Alternatively, it could choose an team ithas yettomeetin-person. to perform diligence and whose backgrounds – on which it has yet one led by people from diverse could go with a fledgling GP – albeit diversity targets will have a choice. It investor to make the easiest return return easiest return, not the best possible consultancy EuropeHead private of equity, investment “ The pandemic is clearly forcing “That thought sends shivers down The onus is on the
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