Connect with us

Case of the Carlyle Group: Fund Investor vs. Firm Investor

Published

on

Is it optimal to invest in a private equity fund, invest in the private equity firm, or both? Sovereign funds and public funds have done it all. Over the years, we have seen deals like the China Investment Corporation’s investment in the Blackstone Group. We have seen CalPERS and Mubadala Development Co. invest in the Carlyle Group and so on. In our estimation, it seems that private equity funds do better than private equity firms when it comes to financial returns.

From CalPERS: Select Private Equity Fund Performance (Firms that have gone public)

Fund Name Vintage Year Capital Committed Net IRR
Apollo Investment Fund V, L.P. 2001 250,000,000 38.10%
Apollo Investment Fund VI, L.P. 2006 650,000,000 4.30%
Blackstone Capital Partners IV, L.P. 2003 185,012,814 38.60%
Blackstone Capital Partners V, L.P. 2006 750,000,000 0.50%
Carlyle Europe Partners II, L.P. 2003 69,157,100 21.70%
Carlyle Asia Partners III, L.P. 2008 300,000,000 -10.80%
Carlyle Partners V, L.P. 2007 1,000,000,000 7.20%
Carlyle Strategic Partners I, L.P. 2004 50,000,000 32.50%
KKR Asian Fund, LP 2007 275,000,000 10.60%
TPG Partners VI, L.P. 2008 855,000,000 -2.80%

Source: CalPERS | The chart avoided private equity funds with a vintage year greater than 2009.

Private equity funds have known risks. They can become zombie funds, lock up capital, produce lowered IRRs, basically lose money for investors. [ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]

Maiden Lane I Ends, Federal Reserve Aims to Shrink Balance Sheet

Published

on

The U.S. Federal Reserve’s balance sheet has been set to decline automatically since 2017, as the central bank has been liquidating funds from its US$ 4 trillion in Treasury bonds and mortgage-backed securities. As holdings matured, the Fed refrained from reinvesting them. This amounts to US$ 40 billion in monetary tightening monthly. Meanwhile, interest rates have slowly, and continuously, risen. The maturation of these Fed assets could exert upward pressure on long-term yields.

Mortgage rates, applications, and home sales have been falling, likely due to the rising rates. While rates are still historically low, U.S. President Trump has criticized the rate hikes. However, the Fed has no interest in changing course, and rates are set to continue to rise. According to Fed meeting minutes, “The Chairman suggested that the Committee would likely resume a discussion of operating frameworks in the fall.”

The size and content of the Fed balance sheet going forward will be a point of discussion for Chairman Jerome Powell. While there is no end in sight for the Fed’s plans to tighten economic policy, changing conditions may warrant further examination. With the U.S. stock market thriving, there is no indication that tightening has had a material impact on the economy. However, conventional wisdom asserts that the Fed will raise rates “until something breaks.” Market commentators have also suggested that, in the event of an emergency, the Fed will have a harder time stepping in due to the size of its balance sheet. A large part of the Fed’s monetary strategy is based around communications, and Fed-watchers have made a habit of hanging on every word. The Fed announced a shrinking balance sheet well in advance, and made gradual moves in that direction. The process has been smooth thus far. The Fed’s tightening will reach its peak, US$ 50 billion, in October. It is unclear exactly how much stimulus is still needed in the economy to reach the Fed’s 2% inflation target. The Fed’s easing policies have been criticized for the lopsided benefits they provided, more for Wall Street than Main Street. However, the easing will reduce their role in the market.

The End of Maiden Lane I

[ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]

Continue Reading

QIA Gets a New CEO

Published

on

Sheikh Abdullah Bin Mohammed Al-Thani exited as CEO of the Qatar Investment Authority (QIA). He has been appointed as minister of state by Amiri Order No. (4) of 2018.

Mansoor bin Ebrahim Al-Mahmoud is appointed as the new CEO of QIA. He held positions in various organizations such as CEO of Qatar Development Bank and worked at Qatar Museums.

Continue Reading

SWFI First Read, September 19, 2018

Published

on

QIA Eyes Investment in Chinese Lender Lufax

The Qatar Investment Authority (QIA) is in talks about a possible investment into Shanghai-based Lufax, one of China’s largest online lenders. The seller of the possible stake is China’s Ping An Insurance (Group) Co. Ltd. Lufax’s official name is Shanghai Lujiazui International Financial Asset Exchange Co. Ltd.

Wealth Funds Back Hotpot Giant

[ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]

Continue Reading

Popular

© 2008-2018 Sovereign Wealth Fund Institute. All Rights Reserved. Sovereign Wealth Fund Institute ® and SWFI® are registered trademarks of the Sovereign Wealth Fund Institute. Other third-party content, logos and trademarks are owned by their perspective entities and used for informational purposes only. No affiliation or endorsement, express or implied, is provided by their use. All material subject to strictly enforced copyright laws. Registration on or use of this site constitutes acceptance of our terms of use agreement which includes our privacy policy. Sovereign Wealth Fund Institute (SWFI) is a global organization designed to study sovereign wealth funds, pensions, endowments, superannuation funds, family offices, central banks and other long-term institutional investors in the areas of investing, asset allocation, risk, governance, economics, policy, trade and other relevant issues. SWFI facilitates sovereign fund, pension, endowment, superannuation fund and central bank events around the world. SWFI is a minority-owned organization.