Private Equity INSIDER 2 Blackstone, Carlyle in Line for Biggest-Manager Throne
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JANUARY 26, 2011 Calpers Seeks Bids for Hefty Fund Interests 2 LARGEST FUND MANAGERS Calpers is pitching more than $800 million of private equity fund stakes on the secondary market. 3 NASBIC Extends Membership Reach The $226 billion pension system began showing the offering to prospective buy- ers in the last week or so via UBS, working under the codename Project Alpha. A 3 StepStone Ponders Secondary Offering sale is expected to take place quickly, perhaps in a matter of weeks. 4 Morgan Stanley Chips Away at Target Project Alpha is likely to rank among the biggest secondary-market sales of early 2011. For a portfolio of its size, however, it contains a small number of positions — 4 CIVC Shortfall Made Official an estimated five or six buyout-fund interests of up to $250 million each. 4 China Specialist Shifts to Co-Investing The pledges are weighted heavily toward large vehicles from well-known manag- ers, with sources pointing to Blackstone Group, Carlyle Group, Kohlberg Kravis Rob- 5 Bank Street Maps Marketing Route erts and TPG as fitting the profile for shops whose funds might be in the mix. That said, the specific identities of the underlying managers remain unclear. 5 Constitution Opts for Dual Pitches So what is Calpers’ motivation? Potential pricing appears attractive, with stakes 5 LGV Pitch Enters Second Round See UBS on Page 5 6 Matrix Folds Placement Efforts Jefferies’ Reshaping Fund-Placement Division 7 FUND-RAISING ACTION Jefferies & Co. is restructuring its placement-agent unit while starting a sepa- rate division to raise capital for clients’ distressed-asset and special-situations vehicles. THE GRAPEVINE The new unit would pitch both private equity funds and hedge funds as part of its targeted strategy, with an initial concentration on the U.S. and Western Europe. Millennium Technology Value Partners It would function as part of Jefferies’ high-yield bond desk. of New York has hired Joseph Marks to Kelli Roiter is leading the effort. She moved to the high-yield department at year- line up secondary-direct investments end from Jefferies’ broader placement group, which has suffered from staff losses in companies backed by venture capital as well as accusations that it upset some large clients by employing heavy-handed funds. The move was unexpected as marketing tactics. Now the word is that the New York investment bank is planning Marks, a former Coller Capital executive, a new look for the operation, although details of that effort remain unclear. had just co-founded a two-man second- Transfers and defections already have depleted the group’s staff, which recently ary-market brokerage called Castlehaven See JEFFERIES on Page 6 Advisors in mid-2010. His partner there, Tom Dann, now is in talks to bring in TPG Strings Together Small-Investment Series a new staffer and may hire additional personnel. Castlehaven focuses on sales TPG wants to replicate a fund that pursues investments deemed too small for its of interests in funds backed by the U.S. main buyout vehicles. Small Business Administration’s Small The Fort Worth, Texas, firm has yet to set an equity target for the new pool, called Business Investment Company program. TPG Star 2, but is seen as likely to aim for $1.5 billion — the same amount it col- lected for the inaugural fund in the series. It began meeting with investors in recent James Hoffman has left a post in Pritzker weeks, telling them it will likely start a formal marketing push during the second Group’s buyout unit to set up his own half of the year. firm. Like Pritzker, Hoffman’s startup, TPG Star 2 would pursue investments up to $75 million each while employing called Magna Capital, is based in Chicago. venture capital, growth-equity, buyout and turnaround strategies. While it would Magna will concentrate on buyouts and have the ability to invest globally, the entity would more likely mimic its 2008-vin- recapitalizations of U.S. businesses in a tage predecessor by focusing on deals in North America, India and China. variety of sectors, including industrial TPG has told backers that the first fund is nearly out of capital. That vehicle took See GRAPEVINE on Back Page See TPG on Page 6 January 26, 2011 Private Equity INSIDER 2 Blackstone, Carlyle In Line for Biggest-Manager Throne Goldman Sachs is still the largest operator of private equity has collected for its newest buyout fund, Blackstone Capital funds in the U.S., but could soon be unseated as new regula- Partners 6. tions force banks to step back from the business. The second-place finisher from 2009,Carlyle Group, is now Goldman’s private equity vehicles had $104.7 billion under in third. Its $97.7 billion tally marks an increase of $9.8 billion management as of Dec. 31, according to Private Equity Insider’s from a year ago, however, and it could breeze into first place by Private Equity Directory. That marks a $10.3 billion decline completing a planned takeover of the €40 billion ($55 billion) from a year earlier, when the bank also was the market leader AlpInvest Partners. — and it has indicated that it will keep chipping away at the As non-bank players, Blackstone and Carlyle will be insu- total. lated from the Volcker Rule. At the same time, the institutions There are even indications that Goldman might spin off its are under pressure to add assets — Blackstone to keep holders private equity operations altogether. The reason: The Dodd- of its publicly traded shares happy by increasing fee revenues, Frank Act’s so-called Volcker Rule, which once implemented and Carlyle to bulk up ahead of an initial public offering of its will restrict banks from sponsoring alternative-investment own. pools while limiting their investments in such vehicles to an Apollo Management also is among those planning to go pub- amount equal to 3% of Tier 1 capital. Goldman, which repre- lic. It moved up to sixth place from eighth thanks to an increase sents an important source of backing for its own funds, had in assets. TPG, another IPO candidate, slipped one spot to sev- $68.5 billion of Tier 1 capital as of June 30. That means it could enth despite a slight rise in its total. only hold $2 billion of interests in alternative-investment ve- Those who might eventually be in the same boat as Gold- hicles. man include J.P. Morgan. The bank, whose alternative-invest- Who could step up to take Goldman’s place? Number-two ment exposure lies largely in hedge funds, ranks 11th with Blackstone Group is only a hair behind, at $102.3 billion, and $29.4 billion in its private equity vehicles. That’s up $4.4 billion has been adding assets. The firm’s total represents a $15.4 bil- from 2009. Most top players saw their totals increase less than lion increase from a year ago, when it was in third place. $10 billion in 2010. Blackstone’s count stands to grow as well, as the shop con- Private Equity Insider’s Private Equity Directory can be tinues raising capital on top of the roughly $15 billion it already See THRONE on Page 6 Largest US-Based Managers of Private Equity Funds Excludes firms primarily managing real estate or hedge funds Assets Under Assets Under Management Management 12/31/10 12/31/10 ($Bil.) ($Bil.) 1 Goldman Sachs $104.7 19 First Reserve $20.3 2 Blackstone Group 102.3 20 Adams Street Partners 20.0 3 Carlyle Group 97.7 20 Welsh Carson Anderson & Stowe 20.0 4 Bain Capital 65.0 22 Ares Management 19.3 5 Kohlberg Kravis Roberts 58.8 23 Lexington Partners 18.0 6 Apollo Management 55.2 24 General Atlantic 17.0 7 TPG 48.0 24 Riverstone Holdings 17.0 8 Oaktree Capital Management 47.3 26 Thomas H. Lee Partners 16.2 9 Credit Suisse 40.8 27 NB Alternatives 16.0 10 Warburg Pincus 32.0 27 TA Associates 16.0 11 J.P. Morgan Asset Management 29.4 29 Madison Dearborn Partners 14.6 12 Cerberus Capital Management 24.0 30 J.C. Flowers & Co. 14.4 13 Fortress Investment Group 23.7 31 Advent International 14.1 14 Angelo, Gordon & Co. 23.0 32 Silver Lake Partners 14.0 15 PineBridge Investments 23.0 33 Commonfund Capital 11.8 16 Hellman & Friedman 22.9 34 TCW Group 11.5 17 Providence Equity Partners 22.0 35 New Enterprise Associates 11.0 18 HarbourVest Partners 21.4 36 BlackRock 10.2 January 26, 2011 Private Equity INSIDER 3 NASBIC Extends Membership Reach Palmer played a key role in both efforts. He joined the group in 2008 from the National Association of Insurance Commission- TheNational Association of Small Business Investment Com- ers, and earlier held staff positions in the U.S. House and the panies is broadening its mandate. U.S. Department of Commerce. The trade group, which until now has represented only pri- vate equity firms backed by the U.S. Small Business Administra- StepStone Ponders Secondary Offering tion’s Small Business Investment Company program, wants to add non-SBIC players to its constituency. As part of the move, In a bid to simplify its secondary-market investments, Step- it’s planning to work with larger shops than those running most Stone Group is mulling the creation of a fund targeting those SBIC vehicles. deals. The organization also plans to change its name to the Small Details of the effort remain unclear, but expectations are Business Investor Alliance. that the La Jolla, Calif., advisory firm will try to raise less than NASBIC’s expanded scope takes aim at mid-size private eq- $500 million — the amount of client capital it currently has de- uity firms — namely, those running funds of up to about $600 ployed among secondary-market deals via at least a half-dozen million.