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U.S. Pension Executives Ink Letters Concerning PE Alignment Issues

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marina_public_pensionsIn general, U.S. public pension funds more than sovereign wealth funds need private equity to help reach their annual target returns. This give-take relationship manifests across America, even when partner alignment issues arise. What has taken center stage is when private equity firms take monitor fees and transaction fees on failing portfolio companies.

The debt binge left a nasty hangover for many pre-2007 private equity funds. Side effects include poor fund performance, languishing portfolio companies and unemployed workers. Emboldened asset owners – some of the larger U.S. pensions are under fire from their support base, public sector unions, in what seems to be private equity firms making money from fees other than turning around actual portfolio companies.

Oregon Public Employees’ Retirement Fund – History with TPG Capital

Vintage Year Fund Name Capital Commitment (Millions USD) Total Value Multiple
1994 TPG Partners I 50 3.66x
1997 TPG Partners II 300 1.77x
2000 TPG Partners III 300 2.47x
2003 TPG Partners IV 300 1.9x
2006 TPG Partners V 300 0.97x
2008 TPG Partners VI 750 1.22x
2008 Apollo Investment Fund VII 400 1.76x

Date: March 31, 2013, Oregon Public Employees’ Retirement Fund

Take for example, Caesars Entertainment Corporation, which TPG Capital LP and Apollo Global Management LLC took private with investor money, mostly public funds. The casino operator became saddled with debt affecting the financial health of the balance sheet. Coupled with top-line revenue shortfalls due to losses in gambling revenues, their investment faltered.[ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]

PNB to Buy Stake from Malaysian Developers in Battersea Power Station Project

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Malaysia-based Permodalan Nasional Bhd (PNB) inked plans to acquire a stake in the Battersea Power Station from Malaysian developers Sime Darby Property and SP Setia, which between them own 80 percent of the site located on the south bank of the Thames. [ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]

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Will Saudi Arabian Sovereign Wealth Be the Next Giant in Hollywood?

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Saudi Arabia’s growing Public Investment Fund (PIF) is reportedly looking into investing over US$ 500 million for a 5% to 10% stake in Hollywood’s Endeavor Talent Agency, the holding company for William Morris Endeavor Entertainment LLC (WME). WME is one of the biggest players in the business, representing well-known artists across a number of different mediums – including cinema, television, music, books, and theatre – as well as a roster of professional athletes from the National Football League (NFL) and National Hockey League (NHL). Discussions are in their initial stages, however, and no commitments have been made thus far. WME is constantly gathering new talent. Recently WME signed musician John Mayer and actor Nicolas Cage – both were with Creative Artists Agency (CAA).

A Logical Connection

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CDPQ Providers Firepower for Blackstone Buyout of PIRET

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Ivanhoé Cambridge, part of CDPQ, is a co-investor in Blackstone Group’s buyout of Pure Industrial Real Estate Investment Trust (PIRET), a listed Canadian warehouse owner. The actual Blackstone buyer is an affiliate of Blackstone Property Partners, its core real estate investment unit. The agreement was revealed on January 9, 2018. Blackstone moved to buy the REIT) for C$ 8.10 per Unit in an all-cash transaction valued at C$ 3.8 billion including debt. The transaction value without debt is C$2.48 billion.

Deal Advisors

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