Loan Note: Study shows what LPs really think; Carlyle results highlights

LPs have an eagle eye on climate change issues – find out more about that and other findings in our LP Perspectives Study. Plus, Apollo's Rowan hopes investors are on board with the firm's changes and Carlyle unveils its latest results. Here's today's brief for our valued subscribers only.

She said it

“What covid has shown is that if you are unprepared for something, then everyone’s going to be scrambling around and then things might be too late.”

Diandra Soobiah, head of responsible investment at UK pension scheme Nest, quoted in an article about how LPs are challenging GPs on ESG.

First look

Inside the minds of LPs
Fund managers beware, because investors are keeping a close eye on you. Specifically, they want to know that you are taking climate change issues seriously and they are not convinced – with 22 percent of them thinking you are not and a further 37 percent unsure.

This was one of the findings from our LP Perspectives Study, published last week. Distressed and special situations investing and the possibility of recession are also front of mind for LPs, we found. See our summary of key insights here.

LP Perspectives also includes the Global Investor 30, our ranking of the 30 largest institutional investors in private debt. The list, which we publish annually, is a clear endorsement of the asset class in the eyes of LPs as commitments keep rising from one year to the next. Find out more here.

While we are on the subject of LPs, make sure you check out this excellent video from PEI’s Nicole Douglas as she finds out what they really think about remote due diligence, as well as some of today’s other major challenges in private markets.

Apollo seeks satisfaction
Apollo Global Management says its response to an investigation around Leon Black’s relationship with Jeffrey Epstein may not satisfy the firm’s entire investor base, reports sister title Private Equity International.

The “vast majority” of Apollo’s 1,500 LPs, as well as their advisors and consultants, were satisfied with its recent governance and leadership changes, soon-to-be chief executive Marc Rowan said on the firm’s Q4 2020 earnings call last Wednesday. A smaller proportion may, however, want to see how these tweaks unfold, he noted.

Carlyle posts strong quarter 
Carlyle Group, in a year in which its business operations were “virtually unaffected” by covid-19, posted a 38 percent rise in fourth-quarter distributable earnings, to $236.9 million, or 64 cents a share. The results outpaced analysts’ estimates.

Total assets under management grew 7 percent in the quarter, to $246 billion. That included a 13 percent rise in the global credit segment’s AUM, to $56 billion. The credit segment’s increase was driven by strong fundraising of $10.1 billion for the year, as well as increased collateralised loan obligation activity, and the first closing of its second credit opportunities fund. Global credit fee-related earnings of $35 million in the quarter surged 150 percent from the like quarter in 2019, driven by higher management and transaction fees, and lower general and administrative expenses.

“We had great momentum in our global credit segment,” Kewsong Lee, chief executive officer of Carlyle Group, said on the earnings call. He noted that the credit opportunities strategy was performing “quite well”, and that the CLO market “is coming back”. Lee said Carlyle was expecting to see continued strengthening in that market.

Data snapshot

Little appetite for seconds. Despite private debt secondaries being strongly tipped as a growing market in the years ahead, our LP Perspectives Study revealed that activity looks likely to be muted over the next 12 months. More than 80 percent of investors said they had no plans to buy or sell private debt fund stakes over that period. Worth noting, however, that private real estate and infrastructure presented a very similar picture. Find out more in our feature on the subject here.

Essentials

Bird lands at Hayfin
London-based fund manager Hayfin Capital Management has appointed Daniel Bird as a portfolio manager for private credit. Bird was previously a managing director at Bank of America where he built and grew a global credit and special situations group in EMEA. He will be based in London and focus on sourcing and analysing investment opportunities and providing portfolio management across the private credit strategies.

ICG hires for latest Recovery fund
London-based fund manager Intermediate Capital Group has hired Lionel Laurant as a managing director, co-head of special situations and co-portfolio manager for its Recovery Fund II.

He previously worked at PIMCO, where he founded and ran the European Credit Opportunities platform for four years, leading a number of investments in distressed and special situations assets, investing across the capital structure and in a number of European jurisdictions. Prior to PIMCO, Laurant was a managing director at Bayside Capital for seven years.

Schroders strengthens in UK, Australia 
Natalie Howard is to join Schroders as head of real estate debt. Based in London, she will be responsible for building a full service, real estate debt platform offering clients a range of risk and return investing across the real estate debt spectrum. Howard has extensive experience in debt capital markets, balance sheet lending and fund management at the likes of DRC CapitalAgFe and Lehman Brothers. She will report to Sophie van Oosterom.

Schroders has also expanded its Australian private debt team with the hire of Tim Hallam as portfolio manager. He will be part of the team responsible for growing and managing Schroders’ private debt capability in Australia. He joins from Northern Australian Infrastructure Facility where he was responsible for the origination and execution of loans benefiting Northern Australia and now reports to Nicole Kidd, head of private debt, Australia.

LP watch

Institution: New Hampshire Retirement System
Headquarters: Concord, US
AUM: $9.9 billion
Allocation to alternatives: 28.5%

New Hampshire Retirement System has approved a 10-year commitment pacing plan, according to the pension’s January 2021 investment committee meeting document. The pension aims to gradually reduce its current allocation towards its target and also maintain vintage-year diversification.

The $9.9 billion US public pension plans to commit $70 million to private debt during the rest of 2021 then make ensuing annual commitments of $170 million.

NHRS has a 5 percent target allocation to private debt that currently stands at 6.1 percent. The pension’s director of investments is Lawrence Johansen and its investment consultant is Callan LLC.


Today’s letter was prepared by Andy Thomson with John Bakie and Robin Blumenthal.

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