– Distressed Opportunities Abound, Notes Oaktree
– Another Major PE Firm – Partners Group – Courts Retail Investors
– Coller Capital Survey Shows PE’s Growing Diversity
– The State of Startups
– Blackstone Closes on $18 Billion, Amid Robust Fundraising
– PE KeyTrends Quick Question Results
DISTRESSED OPPORTUNITIES ABOUND, notes the world’s biggest distressed debt investor, Oaktree Capital, in a Bloomberg story. Oaktree’s co-chairman, Howard Marks, says his firm has the most investments in its sights “since Lehman Brothers collapsed” in 2008. Following the investment bank’s bankruptcy, Oaktree “deployed billions of dollars in distressed debt, reaping a handy profit.” Oaktree “had bemoaned a dearth of distressed-investment opportunities since at least 2013, when the Standard & Poor’s 500 index was still in the middle of a four-year run-up. That changed in August, when investor concern that China’s economic growth was slowing quicker than expected sparked a sell-off in stocks and high yield bonds.” “What you saw in the third quarter of this year could well be a harbinger of things to come in the next year or two,” says Marks’ partner, co-chairman Bruce Karsh. “We’re in the later stages of this credit cycle.” Marks observes that he’s “seen many bonds across industries slide to 60 cents on the dollar from 90 cents since September.” The overall environment for PE-backed purchases is slowly improving.
YET ANOTHER MAJOR PE FIRM COURTS RETAIL INVESTORS. Partners Group, which has $47 billion in PE assets under management, has “introduced private market funds for the defined contribution markets in the U.S., the U.K. and Australia,” writes Private Equity International. “Defined benefit plans have outperformed their DC counterparts partly due” to the former’s “inclusion” of private equity. “Partners Group launch of these funds follow the efforts of firms such as KKR, Blackstone and Carlyle to bring the PE asset class to retail investors.” The trend to tap DC retirement funds controlled by individuals is likely to gain momentum.
THE COLLER CAPITAL GLOBAL PE BAROMETER IS HERE. The latest edition of the twice-yearly survey of 114 investors from around the world shows that appetite for “special (or managed) accounts (i.e., proprietary investment vehicles attached to commingled private funds)” has grown dramatically. “Over one third of limited partners report that their institution’s private equity portfolios now include” such accounts, up from just 13 percent of LPs in 2012. Other highlights: 86 percent of LPs “foresee net annual returns greater than 11 percent” from PE; “44 percent of LPs will have more than a tenth of their PE portfolios in emerging markets within the next 3 to 4 years” – though “only 27 percent of LPs currently have exposure of 11 percent-plus;” and “two-fifths of private debt investors will accelerate their commitments” to debt vehicles “over the next two years,” with just 13 percent expecting to slow investment.” The survey reinforces the idea that portfolios are becoming more diversified in terms of sector, geography and investment structure.
“THE STATE OF STARTUPS.” That’s the title of a survey from well-known VC firm First Round Capital which queried over 500 venture-backed founders for “meaningful insights into what it’s like to run a startup today.” Among survey highlights: well over 90 percent of seed through late-stage founders believe the difficulty of fundraising is set to increase or remain the same; 73 percent believe venture capital is in a valuation “bubble;” 63 percent believe founders have held the power in negotiating VC investments in recent years, but 54 percent say investors will hold the power going forward; and most late-stage founders believe it will “take more than 7 years” for their companies to publicly list on a stock market.
BLACKSTONE’S LATEST FLAGSHIP FUND CLOSES ON $18 BILLION, in an indication of today’s robust buyout fundraising market. Real Deals reports that after holding a $15.7 billion first close in May, Blackstone Capital Partners VII “has wrapped up” fundraising “in excess of its $17.5 billion hard cap with backing from “more than 250 limited partners in 40 countries. The fund is significantly larger than the $13.5 billion the firm raised in 2010,” though it is still “some way short of the $21.7 billion collected for its 2006 vintage.”