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July 20, 2016
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FountainVest Seeks $1.75B for China PoolBY AINSLIE CHANDLER, BLOOMBERG BRIEFS
FountainVest Partners Co., the firm founded by four former Temasek Holdingssenior executives, has set a $1.75 billion target for its latest China fund, according to two people with knowledge of the fundraising.
The firm has set a $2.1 billion cap on the fund and recently held a first close on about $1.7 billion, one of the people said.
The Hong Kong, Shanghai and Beijing-based fund manager invests in sectors linked to buying habits of China's growing middle class, including health care, media and lifestyle companies, according to its website.
If the cap is reached, the new fund would be more than 55 percent bigger than its predecessor, FountainVest China Growth Capital Fund II LP.
The bigger fund comes despite a marked slow down in the Chinese economy in recent years. FountainVest did not respond to requests for comment.
The previous fund closed in November 2012 with $1.35 billion in commitments, according to data compiled by Bloomberg. That fund had a net internal rate of return of 48.5 percent and a 1.8 times multiple of invested capital at Dec. 31, according to data from investor Washington State Retirement System. That puts it in the top quartile among peer funds, according to the data compiled by Bloomberg.
Other investors in the 2012 fund include Ontario Teachers' Pension Plan Board and Temasek Holdings Pte. Ltd. , according to the Bloomberg data.
FountainVest in August 2014 bought a stake in automotive components company Key Safety Systems. The firm is a part-owner of Hong Kong-listed Imax China Holding Inc.
The firm, founded in 2007, is led by Chief Executive , who was previously Frank Tanga senior managing director and head of China investments at the Singapore state investor Temasek. FountainVest managing directors Terry Hu, George Chuang and Chenning Zhao were all managing directors at Temasek, according to FountainVest's website.
— Ainslie Chandler, Bloomberg Briefs
"It's very clear to me that money is going to move out of Europe and into the U.S."
— KKR's Henry McVey, on speaking
Bloomberg TV on July 14
7.25% — New Hampshire 's new, lower Retirement System
assumed rate of return
150M Euros — Amount Eiffel is trying to gather Investment Group
for investmentsrenewable energy
The Illinois Municipal Retirement s investment committee is Fund'
expected to hear from presentationsthe managers of three real estate funds, then consider committing to them, at its July 21 meeting.
FUNDRAISING. Aldrich Capital Partners is trying to raise $250
for its first fund.million Stafford is gathering a Capital Partners fund
for secondary infrastructure fund stakes.
The European REGULATION. Union's investment regulator saidsome overseas alternative funds should qualify for the right to operate across the trade bloc.
Q&A. H.I.G. Capital and Milan-based have set up a Idea Capital Funds
vehicle to take Italian banks' non-performing loans and invest new money to help turn around the businesses. Giuseppe Mirante, managing director of H.I.G.'s Bayside distressed investing unit, explained
for the fund and how it the rationale will work.
QUOTED
WEEK IN NUMBERS
MEETING TO WATCH
IN THIS ISSUE
FROM THE MINUTES COMPILED BY AINSLIE CHANDLER, BLOOMBERG BRIEFS
Venture Fundraising Has Surged in 2016
Venture capital fundraising has rallied in 2016, with $34.8 billion of closings to July 19, compared to $24.1 billion during the same period in 2015, according to data compiled by Bloomberg.
July 20, 2016 Bloomberg Brief Private Equity 2
FROM THE MINUTES COMPILED BY AINSLIE CHANDLER, BLOOMBERG BRIEFS
Illinois Considers Real Estate Managers; IFC Looks at Latin America Venture CapitalBuenos Aires-based Nibulez SA is
raising an early-stage venture capital fund and an accelerator fund, according to a document from a potential investor. World Bank Group's International
is considering investing Finance Corp. up to $3 million in the accelerator, Certo SA (trading as NXTP Labs), which has a $38.5 million target, according to an IFC document. IFC is also considering committing $17 million to NXTP Fund 2 LP, which has a $120 million target, and $10 million in a related co-investment vehicle. The lab will aim to support 300 high-growth technology startups across Latin America and the fund will make venture investments in high-growth technology companies in the same region, according to the IFC document.
>Click for report. here
International Finance Corp. is also considering a $1 million investment in Capria Accelerator Fund, a venture capital fund formed to invest in early-stage local fund managers in Sub-Saharan Africa, South and Southeast Asia and Latin America. Capria Ventures LLC is trying to gather $5 million for the fund.
> Click for reporthere
San Diego County Employees Retirement Association has chosen Aon Hewitt Investment Consulting as its general consultant, according to a report to the pension's board from chief investment officer Stephen Sexauer, taking over from BNY Mellon and Verus.
> Click for letter here
's Illinois Municipal Retirement Fundinvestment committee is expected to hear presentations from the managers of CBRE Strategic Partners U.S. Value 8 LP, AEW Partners VIII LP and Long Wharf Real Estate Partners V LP at its July 21 meeting, then approve allocations to those funds, according to the meeting agenda. The committee is also due to receive its annual private equity performance presentation for 2015.
> Click for the agenda here
California Public Employees Retirement System has sold its stake in LaSalle French Fund II LP to Blackstone Group's Strategic Partners Real Estate Special Opportunities I LP, according to a July 7 regulatory filing in the U.K.
Calpers announced in December it had sold $3 billion worth of interests in 43 different funds to Strategic Partners but did not disclose which funds. The sales are part of Calpers' plan to cull the number of managers in its portfolio from 200 to about 100 by 2020, the pension said at the time.
Since November, it has also sold to Strategic Partners its stake in LaSalle Asia Opportunity Fund II LP, Niam Nordic Fund IV LP, European Property Investors LP and Harbert European Real Estate Fund II LP, according to separate regulatory filings. The Strategic Partners secondary fund held a first close on about $614.7 million in October 2015, according to a regulatory filing in the U.S.
Click for the U.K. filings and for the U.S. filing here here— Ainslie Chandler, Bloomberg Briefs
Calpers Executes on Real Estate Fund Sales
Nebraska Investment Council was due to discuss an asset liability study from adviser Aon Hewitt at its July 19 and 20 education retreat, according to the agenda. The council is also due to discuss a review of its investment consultant and legal counsel and to hear presentations on fixed income investing in the current economy.
> Click for agenda.here
At its board planning session on July 19, Washington State Investment Board was slated to receive education on evaluating private equity funds with different track records and fee structures, private equity incentives and partnership dynamics and what happens when an investment doesn't go as planned. The board was also due to discuss its real estate, private equity and tangible assets plans.
> Click here for agenda.
Louisiana State Employees''s investment Retirement System
committee is expected to receive education regarding emerging markets private equity at its July 21 meeting and to discuss emerging markets mandate search books, according to the meeting agenda.
> Click here for agenda.
Municipal Employees' Retirement 's board is due to System of Michigan
discuss its asset allocation and its 2017-20 strategic plan at its July 20 meeting, according to the agenda.
> Click for agenda here
City of Fresno Retirement Systems retained Oaktree Capital Management and PCCP LLC as their value add and opportunistic real estate managers, according to minutes from the pension's June 28 meeting. The pension adopted a 1.2 percent or $30 million allocation to the asset class. The Fresno pension also agreed to terminate its investment in the PIMCO Unconstrained Bond Fund and eventually redirect the money to the manager's Pimco Corporate Opportunities Fund II and Pimco Bravo Fund III LP, according to the minutes.
> Click for the minutes. here
New Hampshire Retirement System has cut its assumed rate of return from 7.75 percent to 7.25 percent, according to minutes from its June 14 meeting. The pension had $7.3 billion in funds held in trust at April 30, up 1 percent for the month but down 2 percent for the fiscal year to that date.
> Click for report.here
FUNDRAISING
July 20, 2016 Bloomberg Brief Private Equity 3
FUNDRAISING
Stafford Capital Partners is trying to gather as much as 250 million euros ($275 million) for a fund to buy secondhand stakes in existing infrastructure funds, according to a person with knowledge of the fundraising.
The firm started fundraising in March or April and has held a first close on 94.5 million euros for Stafford Infrastructure Secondaries Fund II LP, the person said.
Since that first close, the firm has invested 20 million euros in a portfolio of more than 90 assets, according to an update on Stafford's website. A separate co-investment vehicle, Stafford Infrastructure Co-Investment I, helped with the purchase, according to the website.
London-based Stafford raised 60 million euros for its first infrastructure secondaries fund, the person said. That fund was initially being raised as part of the Macquarie Group. Stafford bought $700 million in specialty funds from Macquarie Investment Services Ltd and Macquarie Investment Management Ltd in June 2014, according to a statement from the time.
Stafford, which also invests in private equity, timberland and agriculture, has about $4.3 billion in assets under management and advice, according to its website.
Stafford investment manager declined to comment on the fundraising.Craig White— Ainslie Chandler, Bloomberg Briefs
Aldrich Capital Partners LLC is trying to gather as much as $250 million for its first fund, according to a person with knowledge of the fundraising.
Aldrich, a mid-market firm, was formed in 2014 by , an entrepreneur who Mirza Baigpreviously served as the chief financial officer of AOL Time Warner's e-commerce unit, and , who was previously a managing director in the Principal Investment Raheel ZiaArea of Goldman Sachs & Co.
The Bethesda, Maryland-based firm, which also has an office in and Hyderabad, India, invests in U.S. companies with $10 million or more in revenue, in the financial technology, health-care information technology and application software, according to its website.
Aldrich has already made several growth investments, using capital from the firm, affiliates and institutional investors, according to another person with knowledge of the matter.
In March 2015 Aldrich invested in a $15 million Series B financing of PhishMe Inc., a provider of computer threat management technology, according to a statement from PhishMe from that time.
It invested in Lavu Inc., a provider of mobile point of sale systems, in June 2015, according to a statement from that time.
Aldrich did not respond to requests for comment.— Ainslie Chandler, Bloomberg Briefs
Asia Research & Capital Management, started by Perry Capital’s former Asia head , has raised $1.3 billion for its third fund, which invests in distressed assets Alp Ercil
globally with a focus on Asia, said a person with knowledge of the matter.Ercil’s Hong Kong-based company completed capital raising for the ARCM Master
Fund III last week, said the person, who asked not to be identified because the information is private. The new five-year pool, its largest, will primarily invest in publicly traded and private credit, the person added. , ARCM’s head of business Yusuf Haquedevelopment, declined to comment on the fundraising.
Distressed-debt funds are raising capital to snap up assets amid an uneven global economic recovery and a commodity price slump. Investors such as George Soros are predicting that the U.K.’s decision to exit the European Union will unleash a crisis in the financial markets.
— Bei Hu, Bloomberg News
Stafford Aims for $275M for Infrastructure Fund Stakes
Aldrich Raising Debut Fund for Growth Investments
Perry Alumnus Said to Seek $1.3 Billion for Distress
Eiffel Investment Group is trying to raise 150 million euros ($166 million) for a fund to invest in small renewable energy and energy efficiency projects, according to documents from the European Investment Bank.
The EIB is considering a 50 million euro in the Eiffel Energy Transition Fund, which will invest primarily in France, according to a report on the bank's website.
The fund will provide short-term financing to onshore wind, solar photovoltaic and energy efficiency projects or development companies.
— Ainslie Chandler, Bloomberg Briefs
Private debt financing in Asia is expanding amid a pullback in bank lending, with Farallon Capital
raising money for Management LLC another fund part-focused on the region.
The San Francisco-based investment firm said last week it raised $1.12 billion for its third fund focusing on private investments in Asia and Latin America. That comes as BlackRock Inc. and OCP Asia (Hong Kong) Ltd. are building up private credit units in the region with new hires, as banks rein in lending amid tighter capital and liquidity requirements.
Private debt funds focused on Asia raised a record $5.5 billion of fresh capital from investors in 2015, a year in which money managers that buy private debt pulled in $85 billion worldwide, the most since 2008, according to data provider Preqin.
— David Yong and Denise Wee,
Bloomberg News
Click for the full story on terminalhere
Eiffel Eyes 150M Euros For Renewables
Farallon Joins Asian Private Credit Rush
PRIVATE EQUITY AND VENTURE CAPITAL NEWS ROUNDUP
July 20, 2016 Bloomberg Brief Private Equity 4
PRIVATE EQUITY AND VENTURE CAPITAL NEWS ROUNDUP
Evercore Partners Inc., the investment bank founded by Roger Altman, is planning to transfer control of a private equity business in Mexico to its principals.
The team, led by Alfredo Castellanos, created an entity called Glisco Partners to take on responsibility for the Evercore Mexico Capital Partners funds, which manage $266 million of invested capital, the New York-based investment bank said Wednesday in a statement. Pedro Aspe, the chairman of Evercore’s Mexico business, will stay on the investment committee for the funds.
Evercore is mainly known for providing advice on transactions such astakeovers and restructurings. Blackstone Group LP Chief Executive Steve Schwarzman said last year when he separated PJT Partners Inc. from the private-equity giant that advisory firms can more easily attract clients when they’re independent.
The Mexico transaction “represents another step forward in our strategy of continuing to invest in our independent, unconflicted investment banking businesses while positioning our investment management affiliates to continue to grow,” Evercore CEO Ralph Schlosstein said in the statement.
Click for full story on the webhere
The new chief executive officer of the California Public Employees’ Retirement System said the largest U.S. pension fund may look to add more investments in private equity and real estate to increase returns and close its unfunded liability.
“When you’re looking at the low rate of return environment in the public markets, I don’t think you can ignore private equity,” , named the Marcie Frostpension fund’s
Evercore Transfers PE Unit to Managers
New Calpers CEO Sees Potential Boost in PE, RE
next CEO on July 14, said in a telephone conference with reporters. “This could be a low-rate environment for a period of time and we have to factor that in when we do our allocation work.”
Click for full story on the webhere
The 's $10 University of Michiganbillion endowment added to its investments in venture capital, private equity and real estate as it struggles to recover from losses.
Michigan invested $177 million in commitments mostly to the private funds, with $45 million going to two energy pools, according to the Board of Regents agenda for its meeting Thursday. The marketable securities portfolio, which makes up 58 percent of the endowment, lost 2.7 percent in the fiscal year through May 31.
Click for the full story on terminalhere
Congress must take steps to broaden access to capital markets for startups and emerging growth companies, including re-energizing initial public offerings, venture capitalists told lawmakers July 14.
, president and Joseph Schockenfounder of , told Broadmark Capital LLCthe Senate Committee on Small Business and Entrepreneurship that the U.S. must address the lack of regional banks that back many startups and finance their efforts to sell shares publicly.
Small IPOs of $25 million “would be what's needed” for many small companies around the country, not the $100 million or more that dominate the market, Schocken said at a committee hearing.
The number of large and small U.S. companies debuting stock to the public
Michigan Endowment Adds to Bets on Private Equity
More Funding Needed for Startups, VCs Say
continues to lag compared to recent years.
Click for the full story on terminalhere
intends to raise EPE Capital Partnersas much as 2 billion rand ($139 million) in a stock placement and Johannesburg listing that will allow shareholders to invest in a portfolio run by sub-Saharan Africa’s largest private equity firm.
, as the listing entity is Ethos Capitalknown, will sell as many as 200 million shares to selected investors and institutions, it said in a statement Monday. Ethos Capital will invest in unlisted holdings in small and medium-size companies managed by Ethos Private Equity.
Click for full story on terminalhere
The business community hasn't exactly unified behind Donald Trump. Many corporate honchos who normally support Republican candidates are alarmed at his economic plans, which include scrapping trade agreements and punishing companies that shift jobs abroad. Even before Trump finished delivering a on trade policy major speechin Pennsylvania last month, the U.S. Chamber of Commerce was targeting him with a torrent of criticism on social media.
All of this has Trump's friends and allies in the business world rushing to explain their candidate, and themselves. On Monday, , a globe-Thomas Barracktrotting billionaire real-estate investor in Los Angeles who describes Trump as a "close friend," is publishing his own 12-page on the economy. It doesn't treatisemention Trump, but it's a kind of defense of Trump's critique of international trade.
Click for the full story on the webhere
Ethos Capital to Sell Stock in Placement for Listing
Colony's Tom Barrack Defends Trump on Trade
REGULATION
July 20, 2016 Bloomberg Brief Private Equity 5
REGULATION
EU Regulator Backs Overseas-Fund Access in Brexit Boost for U.K.The European Union’s investment
regulator said some overseas alternative funds should qualify for the right to operate across the trade bloc, creating a potential opening for U.K. managers worried about losing access after Brexit.
There are “no significant obstacles” preventing hedge funds and private equity firms based in Canada, Guernsey, Japan, Jersey and Switzerland gaining so-called passports under a directive due to come into force in 2018, the European Securities and Markets Authority said in a statement. The Paris-based regulator also backed passports for some types of U.S. funds. It delayed opinions on Bermuda and the Cayman Islands, pending new rules in these nations.
Hedge fund lawyers have highlighted the ESMA report as a key indicator in determining whether European regulators
will let the U.K.’s 700-billion-pound ($922 billion) alternative investment industry operate across the bloc once the country leaves the grouping. About 85 percent of Europe’s hedge-fund assets are managed out of London, making it the second-largest center worldwide after New York, according to estimates from industry group TheCityUK.
Under the Alternative Investment Fund Managers Directive, non-EU funds may be able to get a single passport that will let them sell products in every EU country. Whether a fund qualifies will largely depend upon the regulations in force in its home market. The European Commission will consider the ESMA’s recommendation when it draws up legislation to implement the directive.
The ESMA generally backed awarding passports to firms based in Hong
Kongand Singapore, while noting that there are discrepancies in how accessible funds are for investors in different European countries. It also said Australian firms should get passports, provided the nation standardized its treatment of European funds. The regulator didn’t give an opinion on the Isle of Man because the island doesn’t have a investment regime comparable to the EU directive.
The Alternative Investment Management Association, whose members manage more than $1.5 trillion, said it it welcomed the ruling and that it was optimistic that regulators in the U.S., Hong Kong, Singapore and Australia would quickly be able to resolve the issues highlighted in the report.
— Luca Casiraghi and Silla Brush, Bloomberg
News
COMINGS & GOINGS
July 20, 2016 Bloomberg Brief Private Equity 6
COMINGS & GOINGS
VC Jim Breyer Joins Blackstone Board; Cathrin Petty Moves to CVC said venture Blackstone Group LP
capitalist joined the Jim Breyeralternative-asset manager’s board of directors. The addition expands New
York-based Blackstone’s board to 12members.The group includes five internal
— directors Steve Schwarzman, Tony James, Tom Hill, Jon Gray and Bennett
— Goodman as well as Richard Jenrette, Shelly Lazarus, Jay Light, Brian Mulroney, William Parrett, Peter Grauer and Breyer. Breyer, 54, is best known for being one of Facebook Inc.’s earliest backers while at Accel Partners. In 2006 he formed Breyer Capital, a venture capital and private equity firm that invests in the U.S. and China. He’s a director at 21st Century Fox Inc. and has served on the boards of Facebook, Marvel Entertainment LLC, Etsy Inc., Dell Inc. and Wal-Mart Stores Inc., among others.
Grauer, who joined the company’s board earlier this year, is chairman of Bloomberg LP, the parent of Bloomberg News.
— Devin Banerjee, Bloomberg News
Private equity firm CVC Capital hired from Partners Cathrin Petty
JPMorgan Chase & Co. to run its European health-care operations.
Petty, who was previously head of health care for JPMorgan in Europe, the Middle East and Africa, will join as a partner based in CVC’s London office, the company said in an e-mailed statement.
She’s joining the buyout firm at an active time for the sector. Acquisitions of
pharmaceutical, biotechnology and health-care companies in Europe have
risen to $22.1 billion so far this year, an 82 percent increase from a year earlier, according to data compiled by Bloomberg. Petty worked on PAI Partners SAS’s agreement to buy Atos Medical in May as well as Spire Healthcare Group’s initial public offering, CVC said in the statement.
Petty, who has more than two decades of experience in the industry, was also previously a special partner at U.K. private equity firm Vitruvian Partners LLP and a partner at Apax Partners LLP.
— Sarah Syed, Bloomberg News
, Kayne Anderson Capital Advisorsthe alternative-asset manager that last year canceled a merger with Ares Management LP, named as Mike Levitt chief executive officer.
Levitt, who became a senior credit executive at Apollo Global Management LLC in 2012 when it acquired his firm Stone Tower Capital, will start immediately and be based in Kayne Anderson’s Los Angeles headquarters, according to a statement Thursday.
Kayne Anderson, which manages about $22.5 billion in energy, infrastructure, credit and private equity assets, also said it elevated Bob Sinnottto co-chairman alongside co-founder Ric
. Sinnott was previously the firm’s KayneCEO and president.
The moves bolster Kayne Anderson’s executive ranks as many private equity firms prepare for generational succession.
John Anderson, who with Ric Kayne started the firm in 1984, died in 2011. The proposed merger with publicly traded Ares, announced in July 2015, fell apart three months later as the slump in energy prices exposed a rift between the firms as to how to manage investments.
“We have strengthened our executiveleadership team, provided for continuity in
management for the next generation and ensured my intent for Kayne to remain a
private, independent firm for the longterm,” Ric Kayne said in the statement.
— Devin Banerjee, Bloomberg News
has MVision Private Equity Advisorshired Loren A. Boston as a senior managing director, according to a statement from the firm. Boston was previously President and Chief Operating Officer of Hycroft LLC, an investment bank, and he was previously global head of origination for Merrill Lynch's Private Equity Funds Group and head of the private equity fund group at Citigroup Global Markets.
— Ainslie Chandler, Bloomberg Briefs
Garrett T. Charon, a former partner at in New York, Weil, Gotshal & Manges
has joined as a partner in Ropes & Gray its private equity practice, according to a statement from the firm. Charon is the second former Weil. Gotshal & Manges partner to join the firm in recent months.
joined Ropes & Gray's David M. Bittner private equity practice in April.
— Ainslie Chandler, Bloomberg Briefs
VERBATIM
July 20, 2016 Bloomberg Brief Private Equity 7
VERBATIM
Currency Movement, Japanese LPs Discussed at Asian PE and VC Conference
Private equity and venture capital investors and
managers gathered at New York's Harvard Club
on July 13 for the AVCJ Private Equity & Venture
Capital Forum - USA 2016. Here are some
highlights from panels on investing in Japan and
Southeast Asia.
"Having done this business for 17 years, the only year that the mark-to-market value of our assets has moved more than two percent up or down, in aggregate, was last year. And we got whacked. Hard. That's an unrealized diminution of value, but that was all around local currency movements."
— Rodney Muse, Managing Partner, Navis
Capital Partners, discussing currency hedging on
a panel about Southeast Asia.
"Building up both the investment and the post-investment side takes a lot of work, so I don't think we are in danger of having a lot more sustainable GPs. There will be a lot of groups that try. If anything, South East Asia is a bit over-intermediated on the sell side and the buy side is easy. But to pull everything
together takes a lot of work. Personally for me, I work longer hours than when I was in the States, which I always find surprising. It's very hard work."
— David Do, managing partner, at Vietnam-
based VI Group, discussing the private equity
sector in Southeast Asia.
"They are not giving any favors to Japan in the domestic market, they are looking at it as a global asset. They are going out and working with the global advisers and the global firms to understand what the benchmarks are and to create a portfolio of private equity that will enhance their returns. And more often than not, the first place they allocate is the North American buyouts and European buyouts."
— Richard Folsom, representative partner at
Japan-based Advantage Partners, discussing the
wave of Japanese limited partners investing in
private equity.
"There's a lot of groups out there in South East Asia trying to raise capital, claiming to be pan-ASEAN funds. I think there are only a limited number of really good fund managers who have track
record performance, cohesive teams. We are seeing a lot of new teams trying to
raise capital in the region and I expect this to continue. The demographics in Southeast Asia are so attractive. If you look at the EMPEA 2016 LP survey, South East Asia is the most attractive markets for GPs to invest in over the next 12 months."
— Adam McConagha, Director, Private Equity,
Investment Funds Department, Overseas Private
Investment Corp., speaking on a panel about
investing in Southeast Asia.
"A lot of the traditional banks have gotten out of this business. The Volcker Rule, the Basel III regulations, all of the U.S. banks almost entirely have got out of this direct lending. They do a little bit but it's very focused. And the European banks have so many balance sheet problems and risk weighting issues that they no longer do this. So it's a very welcome, open conversation for companies."
— John Redick, Olympus Capital Asia Credit,
discussing the opportunities for credit funds in
Southeast Asia.
Q&A
July 20, 2016 Bloomberg Brief Private Equity 8
Q&AItalian Government Reforms Open Up Distressed Opportunities, Says H.I.G.'s Mirante
Miami-based and Milan-based H.I.G. Capital
have set up a new vehicle to Idea Capital Funds
take Italian banks' non-performing loans and
invest new money to help turn around the
businesses. It will acquire debt of small and mid-
sized businesses from banks including Banca
Monte dei Paschi di Siena and Banca Popolare di
Vicenza. The banks will retain a stake in the 260
million-euro ($288 million) Idea CCR fund and will
therefore participate in recoveries.Giuseppe
, managing director of H.I.G.'s Bayside Mirante
distressed investing unit, explained the rationale
for the fund and how it will work. He spoke with
Luca Casiraghi of Bloomberg News on July 8.
Q: Why the focus on Italy?A: The business climate in Italy has been challenging for quite some time and distressed debt has been piling up on the banks’ balance sheets. The banking sector is now saddled with more than 360 billion euros of non-performing loans. Red tape is omnipresent and the judicial system, especially with regards to insolvency law and creditor protection, is in dire need of modernization. However, there are a lot of Italian SMEs that are really good at what they do and which represent the backbone of the Italian economy. They are hidden champions, nimble exporters and mini-multinationals in traditional sectors with great potential for growth; but for a variety of reasons, they have become overleveraged or even distressed. It is worth rescuing and financing precisely these SMEs.
Q: Where's the opportunity?A: Small and medium-sized companies, roughly defined by 50 to 500 million euros of revenues. We like traditional private equity sectors such as industrial manufacturing, automotive, construction materials, consumer goods, chemicals and packaging, as opposed to heavily regulated sectors. They are often family-owned and have traditionally relied on regional banks, which struggled post-2008. Entrepreneurs have often been unable to get access to new money to help them turn around or grow their businesses when they needed it, putting more pressure on existing bank loans.
Q: Why now? After years of half-hearted attempts, A:
the political, financial and entrepreneurial establishments have finally started working together to make change possible. In other European countries, the financial crisis hit harder and a solution to NPLs developed earlier. In Spain, for example, the government pushed for the creation of a bad bank to deal with bad debts back in 2012. In Italy, the post-Lehman crisis has been less severe, but the recovery also much less pronounced. Real estate was the main issue in Spain and elsewhere. Relatively speaking, it's more the corporate sector at the heart of the Italian NPL problem.
Q: What's your view of Italian banks?A: Since 2008, we have seen international banks downsizing their activity in Italy and selling out of leveraged loans. In comparison, Italian lenders have found it rather difficult to sell bad Italian corporate loans, especially those to smaller companies. They thought that the economy would recover and their loans with it, so banks amended and extended bad loans waiting for better times that never came. Now, banks have accepted that they need to do something about this as their own existence is at risk. The government is trying to help by attempting to break the corset that inhibits debt sales through the reform of bankruptcy and other relevant laws. This is opening up opportunities for distressed debt investors.
Q: What's your strategy? We require long-term capital, A:
significant local presence, a private equity investing mindset and experienced investment managers who can bring in a skill set that can focus on relatively small investment situations, often with challenging and limited access to financial and legal information.
Q: How will the new fund operate?A: Idea CCR is a turnaround credit fund. H.I.G. Bayside teamed up with Idea Capital, which, being part of a larger family-backed group, has a deep understanding of the Italian market, strong local relationships and managerial know-how. H.I.G. Bayside contributes its experience in international distressed and special situations credit, while H.I.G.'s 12-person strong Italian team based in Milan provides additional private equity expertise and on-the-ground support. The Idea CCR fund will initially manage a portfolio of eight loans to distressed companies, which have been transferred by seven banks, and will provide new money to help restructure and relaunch the underlying businesses. The fund has had a first close of 260 million euros and can be scaled up on a go-forward basis. The fund is designed to simultaneously assist participating banks with the management of their corporate distressed debt exposure and provide SMEs with capital for turnaround and growth.
Current Role: Managing director at H.I.G. Bayside, the distressed debt and special situations affiliate of H.I.G. Capital, since March 2016. Member of the Idea CCR investment committee, which is led by Francesco Gori, former CEO of Pirelli TyreCareer: Head of distressed and loan research at BNP Paribas in London (2011-2016); head of investment origination and advisory at Serone Capital Management (2010-2011); managing director at Cyrus Capital Partners (2007-2008); senior analyst at Trafalgar Asset Management
(2003-2005)Languages: German, Italian, Spanish, French Education: MBA, Columbia University
FEATURE
July 20, 2016 Bloomberg Brief Private Equity 9
FEATURE
Chinese Venture Fundraising at Three-Year Low as Startups HurtBY LULU YILUN CHEN, BLOOMBERG NEWS
The party isn’t quite over for China’s technology startups, but the dance floor’s thinning out.
Judging by the cash that investors are preparing to deploy, the euphoria that catapulted the country’s startup financing to a record 2015 may be starting to wane. Venture-capital fundraising by Chinese firms dropped to just $400 million in the second quarter, its lowest in almost three years, according to London consultancy Preqin Ltd. The number of deals done involving Chinese companies fell 12 percent.
Years of red-hot economic growth and the emergence of a private entrepreneurial class created some of the biggest names in technology, from ride-hailing service Didi Chuxing to the company behind DJI drones. But startups hoping to follow in their footsteps are hurting as the economy sputters: Goldman Sachs Group Inc. estimates the jobless rate will climb to 6.5 percent this year. Prominent investors, including
founder China eCapital Corp. Wang , warn of leaner times ahead in viral Ran
posts. And the investors that once chased the latest Chinese internet fads are growing cautious as valuations rise.
“We’re seeing some distress for startups especially among the smaller, younger unicorns,” said Jarod Ji, an analyst at Zero2IPO, an influential Beijing-based research firm that tracks the VC and private-equity industries. “Most of these companies aren’t profitable, and investors are getting increasingly wary of their burn rates.”
In some ways, China’s catching up to the rest of the world. Erstwhile high-fliers like Jawbone Inc. and WeWork Cos. are laying off staff. Flipkart Ltd. and Snapchat Inc. have seen their valuations lowered.
The situation in China is less clear, but analysts like Ji point to how reports about austerity measures have begun to make the rounds. Chinese grocery deliverer Beequick for instance plans to slash about 30 percent of its employees, the China Business Journal reported in July. A representative for the Sequoia Capital-backed company declined to comment
to Bloomberg News about the report.To be sure, no one’s predicting the
spigot will dry up overnight. Just this month, and Silicon IDG Capital PartnersValley outfit raised a $1 Breyer Capitalbillion fund, though they stressed their long-term horizon. The Chinese government is now angling to become a major technology investor in its own right, backed by public pensions.
But the tide may be turning. Chinese-based VCs raised $1.3 billion in the first two quarters, about half that of the same period in 2015 and close to a fifth of year before, according to Preqin. In the June quarter, they managed to scare up $400 million — down two-thirds from a year earlier.
Entrepreneurs must brace for a “sea change” as the economy embarks on a downward spiral, boutique investment bank eCapital’s founder Wang wrote in a column. Be prepared to reassess assets, rewrite valuations, slash costs, cut people and — above all else — clinch funding immediately, he wrote in the influential business magazine Caixin.
“I urge every investor and entrepreneur to contemplate one question this summer: what can you do to survive and even thrive if, over the next five to 10 years, you face an environment marked by low growth rates, negative yields, a
depreciating yuan and rising levels of bad loans held by Chinese banks,” he said.
The years-long boom in marquee investments in leaders such as Didi and Ant Financial however leaves smaller operators facing a squeeze, with industry executives and investors fearing a looming shakeout particularly in "O2O" or on-demand services, as copycat apps lay on the subsidies to attract users to everything from manicures and grocery deliveries to online financing.
The worst is yet to come, Wang added. The country’s stock market watchdog is tightening rules governing one of the more popular get-rich-quick investor schemes in recent memory, namely U.S.-listed companies delisting in order to go public back home in China at much loftier valuations. That clampdown means investors who borrowed to bet on potential delistings will need to unload their shares, further depressing valuations, he wrote.
For now, the pain should be confined mostly to smaller startups. China’s home to the largest herd of unicorns or billion-dollar startups outside of the U.S., with at least 79 private companies worth more than $1 billion, according to Shanghai-based IResearch. The U.S. in comparison has about 96, according to CB Insights.
AROUND THE WORLD IN SEVEN DAYS PRIVATE EQUITY DEAL NEWS
Fundraising at Lowest Level Since Late 2013
July 20, 2016 Bloomberg Brief Private Equity 10
AROUND THE WORLD IN SEVEN DAYS PRIVATE EQUITY DEAL NEWS
Blackstone, Vista Mull IPOs for Portfolio Companies; KKR, Aion Eye Indian Steel
WHERE THE MONEY GOES COMPILED BY ERIN ZLOMEK, BLOOMBERG NEWS
July 20, 2016 Bloomberg Brief Private Equity 11
WHERE THE MONEY GOES COMPILED BY ERIN ZLOMEK, BLOOMBERG NEWS
Significant venture capital investments of the past week.
Oriza Seed Venture Capital (Oriza Seed), Boyu Capital and WuXi Healthcare Ventures (WXHV) participated in a
$150 million series A round for CStone Pharmaceuticals, a biotech company focused on the needs of Chinese patients. The company also named Frank Jiang CEO.
KKR led a $65 million round in U.K. cybersecurity firm Darktrace. Summit Partners, TenEleven Ventures and SoftBank
also participated. The round gives the company a valuation of more than $400 million, according to TechCrunch.
SR One, Ltd, the corporate venture capital arm of GlaxoSmithKline, joined a $51 million series B round for Second
Genome. The company focuses on developing drugs targeting proteins, peptides and metabolites generated by the gut’s microbiome. (BioSpace)
DFJ Growth led a $181 million series C round in Unity Technologies, a development platform for
creating 2D, 3D, virtual and augmented reality games and experiences. Pokemon Go was created using the platform. China Investment Corp., FreeS Fund, Thrive Capital, Max Levchin, Sequoia Capital and WestSummit Capital also participated. DFJ’s Barry Schuler will join the company's board.
Beijing Phoenix Wealth Holding Group and Hangzhou Liaison Interactive Information
Technology invested $449 million in Beijing-based installment payment e-commerce company Qufenqi, which plans to change its name to Qudian. The company claims to have more than 20 million cumulative users. (China Money Network)
Sequoia Capital led a $70 million series C round in Beijing-based cloud-
communication service provider Yuntongxun.com (Beijing Yung Autopass Information Technology Co. Ltd.). The company sees using the proceeds to improve its product and expand services. TBP Capital also participated. The company claims to have served more than 50,000 companies including Alibaba, Tencent, JD.com and Baidu. (China Money Network)
Stripes Group led a $81.59 million round for Mumbai-based Bigtree Entertainment, a company that owns an
entertainment and ticketing portal called BookMyShow. Network 18, Accel Partners and SAIF Partners also participated. The round values the company at over Rs 3,000 crore. (The Economic Times)
Sources: Bloomberg News except where noted in parentheses.
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COMMITMENTS AND LAUNCHES
July 20, 2016 Bloomberg Brief Private Equity 12
Recently Disclosed LP Commitments
LIMITED PARTNER FUND REGION STRATEGY CURRENCYCOMMITMENT
(ORIGINAL CURRENCY)
TARGET (ORIGINAL CURRENCY)
Texas County & District Retirement System Marlin Heritage Europe LP Any Buyout EUR 56 200
Connection Capital LLP DN Capital Global Venture Capital IV LP Any Venture EUR 2 200
Hongyu Wear-Resistant New Materials Co Ltd Hong Yuan New Material Buyout Fund LP Asia Pacific Emerging Buyout CNY 70 1,000
El Paso Firemen & Policemen's Pension Fund Gamut Investment Fund I LP North America Buyout USD 9 750Source: Bloomberg Private EquityCompiled from public disclosures by limited partners. Includes commitments that were scheduled for approval but are not yet approved or whose approval has not been confirmed.All figures in millions.
Recently Launched/Premarketing
FUND STRATEGY REGION CURRENCYTARGET
(ORIGINAL CURRENCY)
Accelerant Fund II LP Venture North America USD n/a
Betaworks Ventures 1.0 LP Venture North America USD 75
Black Wall St Equity Fund LP Fund of Funds North America USD 25
Bouwfonds European Student Housing Fund II Real Estate Western Europe EUR 400
Cantos Ventures I LP Venture North America USD 10
DPE III Growth Western Europe EUR 475
Fitz Gate Ventures LP Venture North America USD 15
Hidden Harbor Capital Partners Fund I Buyout North America USD n/a
Polaris Venture Partners VIII LP Venture North America USD 400
Shopoff Commercial Growth & Income Fund III LP Real Estate North America USD 50
Spindletop Healthcare Growth Capital II LP Growth North America USD 200
Staley Capital Fund II LP Growth North America USD 125
Third Prime Alpha Fund LP Venture North America USD 25Source: Bloomberg Private EquityCompiled from SEC filings, Bloomberg stories and other press reports. Reports from sources other than Bloomberg have not been verified. All figures in millions.
COMMITMENTS AND LAUNCHES
CLOSES
July 20, 2016 Bloomberg Brief Private Equity 13
Recently Closed
FUND STRATEGY REGION CURRENCYTARGET
(ORIGINAL CURRENCY)
CLOSED IN 2016 ($)
TOTAL RAISED TO
DATE ($)
500 TukTuks Venture Asia Pacific Emerging USD 10 8 8
Aisling Capital IV LP Buyout North America USD 40 143 143
Arbor Debt Opportunities Fund I LP Debt North America USD 125 125 125
Arel Denver III LP Real Estate North America USD — 25 25
BGV III LP Venture North America USD 75 34 34
Blackstone Real Estate Partners Europe V LP Real Estate Any EUR 7,000 6,300 6,338
Blue Road Capital LP Buyout North America USD 500 284 433
BOV Capital Venture Fund Venture Asia Pacific Emerging INR 1,000 5 4
Cabot Industrial Core Fund Real Estate North America USD 1,100 468 468
Creation Investments Social Ventures Fund III LP Buyout Any USD — 48 116
Crown Capital Fund IV LP Debt North America CAD — 25 96
DC Capital Partners II LP Buyout North America USD 350 123 123
DCM Ventures China Fund II LP Venture Any USD 400 500 500
DFJ Growth 2016 LP Venture North America USD 500 64 64
Edison Partners VIII LP Growth North America USD 250 265 265
Essex Woodlands Fund IX LP Growth North America USD 750 98 458
Fontinalis Capital Partners II LP Venture North America USD 125 49 100
FusionX Ventures Fund I LP Venture North America USD 15 10 10
Georgian Partners Growth Fund III LP Venture North America USD 100 165 165
Golub Capital Partners 10 LP Debt North America USD — 376 446
Golub Capital Partners International 10 LP Debt Any USD — 260 437
HarbourVest Partners Mezzanine Income Fund LP Debt North America USD — 146 146
Highbridge Principal Strategies-Mezzanine Partners III LP Debt Any USD 5,500 4,618 4,618
Industry Ventures Direct LP Coinvestment North America USD 200 197 197
Industry Ventures Partnership Holdings IV LP Secondary North America USD 200 205 205
Israel Infrastructure Fund III LP Real Assets Middle East and Africa USD — 256 256
Knighthead Special Situations Real Estate Fund II LP Real Estate North America USD 250 107 108
Marlin Heritage Europe LP Buyout Any EUR 200 361 361
MedScience Ventures LP Venture North America USD 10 4 4
Mitiska First Retail International 2 Real Estate Eastern Europe EUR 120 209 209
Mobeus Equity Partners IV LP Growth Western Europe GBP 100 102 102
OpenGate Capital Partners I LP Buyout Any USD 250 202 305
Pelican Energy Partners II LP Buyout North America USD 225 210 210
RCP Fund XI LP Fund of Funds North America USD 250 189 189
RCP SBIC Opportunities Fund Fund of Funds North America USD 100 38 38
RMS Evergreen US Forestland Fund LP Real Assets North America USD — 127 127Source: Bloomberg Private EquityCompiled from SEC filings, Bloomberg stories and other press reports. Reports from sources other than Bloomberg have not been verified. All figures in millions.
CLOSES
Continued on next page…
July 20, 2016 Bloomberg Brief Private Equity 14
Recently Closed
FUND STRATEGY REGION CURRENCYTARGET
(ORIGINAL CURRENCY)
CLOSED IN 2016 ($)
TOTAL RAISED TO DATE ($)
Rockpoint Growth & Income Fund II LP Real Estate North America USD — 783 783
Rockwood Capital Real Estate Partners Fund X LP Real Estate North America USD — 611 611
Round Hill Music Royalty Fund II LP Real Assets Any USD — 123 123
Sango Private Equity II LP Fund of Funds Middle East and Africa USD 200 87 87
Santander Innoventures Fund Venture Any USD 100 100 200
Silver Point Specialty Credit Fund LP Debt North America USD 384 214 384
SMC Growth Capital Partners II LP Growth North America USD — 8 48
Thrive Capital Partners V LP Venture North America USD 700 700 700
US Farming Realty Trust III LP Real Assets North America USD 1,000 251 502
Continued from previous page...
CLOSES…
CALENDAR
July 20, 2016 Bloomberg Brief Private Equity 15
Upcoming Limited Partner Meetings
LIMITED PARTNER DATE NOTES
Arizona Public Safety Personnel Retirement System 7/20
Boston Retirement Board 7/20
Detroit General Retirement System 7/20 Board meeting
Firemen's Annuity and Benefit Fund of Chicago 7/20 Retirement board meeting
Fort Worth Employees' Retirement Fund 7/20
New York City Employees' Retirement System 7/20 Common investment meeting; manager presentations
Oklahoma Police Pension & Retirement Board 7/20
San Antonio Fire and Police Pension Fund Board 7/20 Investment committee meeting
Stanislaus County Employees' Retirement Association 7/20
University of California Board of Regents 7/20 Finance committee and board meeting
West Virginia Consolidated Public Retirement Board 7/20 Board meeting
Fresno County Employees' Retirement Association 7/21 Board meeting
District of Columbia Retirement Board 7/21 Board meeting
Illinois Municipal Retirement Fund 7/21 See From The Minutes
Los Angeles Fire and Police Pensions 7/21 Board meeting
Louisiana State Employees' Retirement System 7/21 See From The Minutes
Michigan State Police Retirement System 7/21
Missouri State Employees' Retirement System 7/21 Education conference
Municipal Employees' Annuity and Benefit Fund of Chicago 7/21
Municipal Employees' Retirement System of Michigan 7/21 Board retreat. See From The Minutes
Nevada Public Employees' Retirement System 7/21
New Mexico Educational Retirement Board 7/21 Investment committee meeting
North Carolina Teachers’ and State Employees' and Local Govt Employees’ Retirement Systems 7/21
Ohio School Employees' Retirement System 7/21
Oklahoma Public Employees Retirement System 7/21 Board of trustees meeting
Regents of the University of Michigan 7/21
San Diego County Employees Retirement System 7/21 See From the Minutes
School Employees Retirement System of Ohio 7/21
Sonoma County Retirement Board 7/21 Investment committee meeting
University of Texas Investment Management Co. (UTIMCO) 7/21 Board meeting
East Riding Pension Fund 7/22 Pensions committee meeting
Illinois Municipal Retirement Fund 7/22 See From The Minutes
University of Missouri 7/22 Board of curators teleconference
San Joaquin County Employees Retirement Association 7/24 Financial meeting
El Paso County Retirement Board 7/25
Milwaukee Employes' Retirement System 7/25 Board meeting
Policemen's Annuity and Benefit Fund of Chicago 7/25 Investment meetingSource: Bloomberg BriefCompiled from limited partners' websites and press releases.
CALENDAR
Continued on next page…
July 20, 2016 Bloomberg Brief Private Equity 16
Upcoming Limited Partner Meetings
LIMITED PARTNER DATE NOTES
Los Angeles City Employees' Retirement System 7/26 Board of administration meeting
Louisiana Assessors' Retirement System Board of Trustees 7/26 Retirement board meeting
San Mateo County Employees' Retirement Association 7/26
Milwaukee County Employees' Retirement System 7/27 Board meeting
Orange County (Calif.) Employees Retirement System 7/27 Investment committee meeting
Pennsylvania State Employees' Retirement System 7/27
San Antonio Fire and Police Pension Fund Board 7/27 Board meeting
Santa Barbara County Employees' Retirement System 7/27
Teachers Retirement System of Georgia 7/27
West Sussex County (U.K.) Pension Fund 7/27Source: Bloomberg BriefCompiled from limited partners' websites and press releases.
Continued from previous page...
CALENDAR…
LISTED PRIVATE EQUITY
July 20, 2016 Bloomberg Brief Private Equity 17
LISTED PRIVATE EQUITYShares of Japan's rose the most of major publicly traded private equity fund managers in the week ended July 19, Jafco Co. Ltd.gaining 18.5 percent. Still, the company's shares are off 38.4 percent this year.
— John E. Morris, Bloomberg Briefs
Source: Bloomberg. Prices and market caps in local currencies. Updated after the close of the market July 19.
