Highlights:

– Apax and Bain “Club” Together for PT Telecom
– An SEC Investigation may Result in Standardized PE Performance Data
– The Growing Debate Concerning LPA Disclosure
– The PE Reinvestment Dilemma
– Singapore is Home to the Boldest SWFs



WHO SAYS THE CLUB DEAL IS DEAD?
Confirmed today, the $8.8 billion joint bid by Apax Partners and Bain Capital Partners for the Portuguese assets of PT Telecom is evidence that “club deals” between general partners remain attractive at a time when many claim such transactions have been replaced by co-investing. Co-investment deals, where limited partners typically invest alongside their fund managers, can take longer to put together and tend to bring fewer research and operational resources to the table than partnerships between experienced GPs who might otherwise be competing against each other. The offer from Apax and Bain is $62 million higher than a rival offer from Patrick Drahi’s Altice. “The bidders are seeking expansion in a market set to benefit from rising demand for Web downloads and video streaming,” writes Bloomberg. Meanwhile, Real Deals observes that “if a deal is struck it would be one of the largest European buyouts in recent memory. Last year’s biggest transaction was BC Partners’ $4.4 billion takeover of publishing company Springer Science.”

Bloomberg
Real Deals


THE SEC IS LOOKING AT HOW GPs CALCULATE NET RETURNS, reports Reuters. “Private equity fees are not standard and different investors in the same fund can pay different fees,” resulting in net returns that can vary substantially, a state of affairs that concerns the U.S Securities and Exchange Commission. In particular, “including the general partner’s money in the average net returns” data disclosed to investors can be misleading since GPs often pay no fees for investing in their own funds. “The SEC is investigating whether PE fund managers properly disclose whether they are doing that or not.” With fund managers “already under pressure from investors to simplify” fees and expenses, the SEC investigation is likely to “force” funds “to increase disclosures and make their numbers more intelligible to investors.”

Reuters


PUBLIC PENSION FUNDS UNDER PRESSURE: MUST THEY REVEAL MORE ABOUT THE FUNDS THEY INVEST IN? As The Wall Street Journal reported that “KKR & Co. warned Iowa’s public pension fund against complying with a public-records request for information about fees,” pro and con opinion pieces on public pension plan disclosure appeared on peHUB. Steve Judge, president and CEO of the Private Equity Growth Capital Council argues that the confidentiality of limited partnership agreements “is paramount for a simple reason: PE is one of the most competitive corners of the financial marketplace” and “calls for public pension funds to disclose the terms that govern their investments in PE funds ignore the substantial benefits that this very confidentiality provides the pension and its beneficiaries.” Chris Witkowsky, peHUB’s principal columnist, argues that while full LPAs should not be made public, “it is time for consistency across the U.S. public pension system universe when it comes to PE transparency. High level terms should be made public in a timely fashion for everyone to understand the costs, benefits and risks.” As this debate amplifies, it may well attract regulatory attention in the U.S. and elsewhere.

THE WALL STREET JOURNAL
peHUB
peHUB


“MO’ MONEY” EQUALS “MO’ PROBLEMS,” sums up Real Deals in a story on the “private equity re-investment dilemma.” “It’s not the most obvious quandary to find oneself in, but investors now have more money than they know what to do with,” writes Real Deals. “With the prising open of the initial public offering window last year and the return of acquisitive corporate buyers, fund managers have been returning cash to their investors like never before. In the nine months through September, funds distributed $359 billion, already topping last year’s annual record of $344 billion, the latest quarterly from placement agent Triago shows. The problem now is what to do with all that money. Limited partners spent the years leading up to the crash ploughing into PE. Post-crunch, they pulled back dramatically to rebalance their portfolios. Coupled with low rates of new acquisitions, this means there is now a wall of capital looking for a home.”

Real Deals
Triago


GIC AND TEMASEK ARE THE “BOLDEST” DIRECT INVESTORS AMONG SWFs. The two “accounted for 60 percent of the $23 billion in cross-border deals by the world’s sovereign wealth funds in the first half of this year as they made bets in sectors ignored by their rivals,” writes the Financial Times, citing data from the Sovereign Wealth Centre. “GIC and Temasek made 61 direct investments abroad with a total value of almost $14 billion, with an emphasis on consumer industries and emerging market technology – including e-commerce and business services. The Singapore-based funds, respectively the world’s sixth and ninth largest state investors by assets, also accounted for about 60 percent of transactions by number of deals.”

Financial Times