In the news: Private equity

Headline-making deals have kept the private equity sector in the news recently, but a regulatory clampdown could be on the way in the US
by Sophie Mackenzie


Private equity professionals headed to Berlin from 9 to 12 November for the annual SuperReturn International conference, reflecting on the sector’s “strongest year yet”, writes Andrew Woodburn in an article for financial data and software firm PitchBook. “The past 18 months have left many industries humbled," he writes. "Not so with private equity. The asset class has performed exceptionally despite the macroeconomic headwinds.” Woodburn cites figures from PitchBook’s most recent European PE Breakdown, which show that “the first nine months of this year has [been] some of the best for dealmaking yet, with €548.7bn transacted across 5,492 deals”.

One recent noteworthy deal has been HSBC Asset Management’s closing of its second directly managed secondaries fund, Private Equity Opportunities II (PE Opps II), with total commitments of more than US$1bn, according to a report in Investment Week by Ellie Duncan.

“PE Opps II, which launched in August this year, will be managed by HSBC Alternatives’ private equity team and comprises a portfolio of 26 private equity funds and primary capital of US$100m for new co-investments. The fund closed in October and comes after the firm’s first secondaries fund, Private Equity Opportunities, raised US$1.34bn in December 2020,” writes Duncan.

The article quotes HSBC Alternatives CEO Joanna Munro, who says the closing of the fund is “a clear signal” of the importance of alternatives.

Investment Week article

Opaque fund sizes

But the sector has attracted attention for other reasons too. Growing demand has seen investors compete to secure allocations with top-performing funds, and managers are opening funds’ data rooms to investors without first revealing what the eventual size of the fund will be, according to a Today UK News article.

“As demand for private equity has grown and investors scramble to secure allocations with top performers, veteran private-equity firms can afford to delay communicating such goals, if not dispensing with them altogether,” it says.

The article gives examples of asset managers who have opened data rooms for new funds without specifying a target, and says that others are setting ranges for the fund target. Vista Equity Partners, it says, set a target range of US$20bn–24bn for its latest fund.

But the trend is not confined to the biggest players. Brendon Parry of asset manager TIFF Investment Management is quoted as saying that while it remains “the exception rather than the rule”, there are some “coveted managers” with strong performance records who are able to set nebulous targets, giving them greater flexibility when it comes to the ultimate fund size.

Today UK News article

“Everything crackdown” targets private equity

Meanwhile, Gary Gensler, head of the US Securities and Exchange Commission (SEC), has signalled increased scrutiny over how private equity funds charge investors and measure performance. In what Bloomberg describes as an “everything crackdown”, Gensler suggests that the SEC would consider extending the reach of federal securities laws into the operation of private funds, according to analysis in JD Supra by David Marcinkus and Robert Plaze.

Before a meeting sponsored by the Institutional Limited Partners Association, Gensler expressed his views on the role of private equity and hedge funds, saying that he sought to “bring more sunshine and competition to the private funds space”, noting that its operation affected not only wealthy investors, but also the retirement and pension funds of “teachers, firefighters, municipal workers, students and professors”.

Gensler outlined five areas in which he has asked SEC staff to consider recommendations that would lead to greater transparency: fees and expenses, side letters, performance metrics, fiduciary duties and conflicts of interest, and amendments to Form PF.

JD Supra article

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Published: 18 Nov 2021
  • International regulation
  • Wealth Management
  • alternative assets
  • fund management
  • US
  • private equity

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