The world this month – November 2009

FUNDRAISING WINNERS AND LOSERS
HELLMAN & FRIEDMAN CLOSES $8.8BN FUND
The San Francisco firm has raised the year’s second-largest fund which, at $8.8 billion, is the largest in its history. The firm’s previous fund closed on $8.4 billion in 2006. Philip Hammarskjold has become chief executive, succeeding Brian Powers, who takes the chairman’s role from founder Warren Hellman. Patrick Healy, head of the London office, becomes deputy chief executive.

CANDOVER DELAYS FUND DECISION
Candover Partners has lost its equity stake in ALcontrol, the food and environmental testing laboratory business. The UK-based business is now under the control of GSO Capital. Candover is currently in discussions with limited partners over its latest buyout fund, for which it had managed to raise €3 billion in 2008, as to whether the fund has a future and whether Candover Partners, the wholly owned subsidiary of the listed group Candover Investments, should be spun off as an independent management firm.

APOLLO NEARS $1BN FOR DEBT FUND
Buyout and distressed debt investor Apollo Global Management has raised almost $980 million for the Apollo European Principal Finance Fund (EPF). The fund is targeting $2 billion. Apollo Alternative Assets (AAA), Apollo’s Euronextlisted affiliate, has committed $315 million to the fund.

PAI MAY CUT FUND V IN HALF
European buyout firm PAI Partners has offered investors the chance to halve their commitments to its €5.4 billion fifth fund, which has currently suspended investment due to key personnel changes. The fund’s size and other terms are currently up for review following the surprise departure of Dominique Mégret, a 35-year veteran of the firm and chief executive since 2006. Mégret had been at the helm for the fundraising of Fund V, which was closed in May 2008.

ACTISD RAWS $750M FOR INFRASTRUCTURE
Actis has held a final close on $750 million for its second infrastructure fund, Actis Infrastructure 2, falling short of its $1.25 billion target. The fund’s anchor investor, UK government-backed fund of funds CDC Capital Partners, was forced to reduce its intended commitment by $250 million, due to other commitments and funding priorities in the current environment.

GOLDMAN, AXA TARGET “EARLY” SECONDARIES
The two firms are raising “early” secondaries funds to invest in LP interests that are only minimally drawn. Goldman is targeting $300 million for Goldman Sachs Early Secondaries Fund, which is the bank’s first fund dedicated specifically to investments in young LP stakes. Axa is trying to collect €600 million for its fourth early secondaries fund.

PAY-TO-PLAY ROILS MARKET
MEYER PLEADS GUILTY
The founder of private equity advisory firm Aldus Equity, Saul Meyer, has admitted to having knowingly engaged in pay-to-play corruption in New York and New Mexico. Meyer entered his plea in New York County Supreme Court on 2 October. He faces up to four years in prison.

INFRA FUND EYES AGENT
An infrastructure firm called Emerald Infrastructure, raising a €750 million fund for infrastructure investments in Northern Ireland, has told the SEC it is checking to see if its placement agent, Shelbourne Securities, paid anyone else in connection with the marketing of the fund. The fund received a $75 million commitment from the New York City pension system, controlled by city Comptroller Bill Thompson, who is running for city mayor. A principal at Shelbourne, William Howell, is reportedly a friend of Thompson’s.

CALPERS INVESTIGATES ARVCO
CalPERS is reviewing placement fees paid to a company run by a former CalPERS board member. The pension learned from investment fund managers about payments of more than $50 million in fees over five years to ARVCO Financial Ventures, a placement agency run by Alfred Villalobos, who served on the CalPERS board between 1993 and 1995.

SEC GETS 170 COMMENTS
The 60-day public comment period on the Securities and Exchange Commission’s proposed “measures to curtail pay-to-play practices” ended last month. The SEC’s plan, which would prevent private equity firms from hiring placement agents to solicit public pensions for commitments, drew some 170 responses, many from the private equity community, and most of which say the rule would hurt GPs and LPs alike. The SEC’s staff will now review the responses.

MARKET SIGNALS
HANDS: GPS MUST COME CLEAN
Terra Firma Capital Partners boss Guy Hands delivered a gruesome prognosis for the private equity industry in an interview with the New York Times, describing how both lenders to businesses and their private equity owners will force portfolio companies to “live as zombies, unable to grow their businesses or make long-term commitments.” Highly levered businesses, such as Terra Firma’s music group EMI, are forced to cut investment and direct cash towards servicing their debt. “Neither banks nor PE wants to come clean about their mistakes,” he said.

EUROPEAN VALUATIONS STILL TUMBLING
Valuations of unlisted European mid-market companies are still falling, according to a report commissioned by mid-market buyout firm Argos Soditic. Since reaching a high of 9 times EBITDA during 2006 and 2007, the average valuation of unlisted European companies has fallen consistently for 24 months and is now at 6.2 times EBITDA. This is the lowest level since Argos Soditic first commissioned the Argos Mid-Market Index in 2004.

SCHWARZMAN: ‘THE WORSTIS BEHIND’
The Blackstone Group may soon sell five portfolio companies – returning $2.8 billion to investors – and exit up to another eight via public floats, according to an investor letter seen by the Financial Times. “We see the world changing once again. At least for private equity, the worst is behind the industry,” Schwarzman reportedly wrote in the letter, sent to limited partners last month. During its second quarter earnings call in August, president Hamilton “Tony” James said he expected to see more portfolio companies sold or going public over the next 12 months.

WEALTH MANAGERS RECONSIDER LISTED PE
After a tough year for listed private equity stocks, European wealth managers are becoming better disposed towards the asset class and likely to increase their exposure during 2010, according to a survey commissioned by LPEQ, the association for listed private equity vehicles. Over half – or 53 percent – of those who already invest in listed private equity intend to increase their allocation in the coming year. This comes after a 12 month period in which 47 percent of listed private equity holders reduced their allocation to it.

HUMAN CAPITAL
EUROPEAN DEBT VET JOINS OAK HILL
Oak Hill Advisers, the debt- and creditfocused investment firm, has hired Goldman Sachs veteran Alexandra Jung as its European co-head. Jung will lead the firm’s European activity alongside Oak Hill’s incumbent European head, Richard Munn. The appointment follows the final close last week of the OHA Strategic Credit Fund, which was oversubscribed to the tune of 50 percent. The fund reached $1.1 billion, exceeding the firm’s initial target of $750 million.

MOULTON’S NEW FIRM ‘COMING TO GETHER
Jon Moulton has launched Better Capital, just weeks after leaving Alchemy Partners, the buyout firm he co-founded in 1997, over a strategy spat with his partners. Up and running just around the corner from Alchemy’s offices in London’s Covent Garden, Better Capital will focus on turnarounds – the strategy from which Alchemy’s other partners reportedly intended to move away. “The team is coming together and plans are being progressed,” Moulton told PEI.

BIRTH OF A SECONDARIES FIRM
Philip Durden, a former professional at Lexington Partners, has joined James Hale at upstart secondaries firm The Aldenwood Group. Aldenwood, based in San Mateo, California, will focus on buying secondary interests in private equity funds targeting investments in the $25 million to $50 million size range. The firm was founded earlier this year by Hale, a former partner at Oak Hill Investment Management, a fund of funds and secondaries firm connected to the Robert Bass family.

CORRECTION
In the October 2009 issue of PEI, we published a news item on p.10 entitled “AIG gets out of alternatives”. We would like to make clear that, contrary to our implication, AIG has not dissolved its private fund holdings – it has sold them to Pacific Century Group as part of the disposal of AIG Investments. We are happy to set the record straight.