Sidecar private equity funds have become increasingly popular among public pensions and other large institutional investors, who argue they are getting a better deal than are those who can only access the "main funds." But new academic research suggests that it's not necessarily so.
The researchers found that GP-directed funds had worse average performance than did the main funds raised at the same time by the same firms, while discretionary co-investment funds were basically a wash.
When examining top private equity managers, things changed a bit. GP-directed funds still came up short, but co-investment funds over-performed the main funds.
Bottom line: Our general understanding of private equity fundraising is that limited partners pick general partners, based on things like track record. But the reality is that persistence is a two-way street, and GPs often are the ones doing the picking.
More desirable LPs get better allocations in the main funds, and the opportunity to participate in co-investment funds. Less desirable LPs get worse (or no) allocations in the main funds, and are often pushed into GP-directed funds (i.e., lower-tier investors are given access to lower-tiered deals).
It's the sort of thing you won't see mentioned in a public pension press release. But it should be.
Apollo Global Management agreed to buy Aspen Insurance (NYSE: AHL) for $2.6 billion, or $42.75 per share (6.6% premium to Monday’s closing price).
🎧 Listen up: The latest Pro Rata podcast focuses on Bitcoin, and includes a discussion with CNBC anchor Melissa Lee (who just premiered a documentary on the cryptocurrency). Get it via Apple, Google Play or direct at Axios.
• Today in Abraaj: Firm founder Arif Naqvi has reached a settlement on his $217 million bounced check case, just days after a UAE court sentenced him to three years in prison. Per UAE law, the settlement extinguishes the prison term. It also soothes the embarrassment we've all felt when bouncing $217 million checks.
• Quiz Time: Can you name the South American tech startup that just raised new funding at a unicorn valuation? Hint: Most of its existing investors are based in Brazil or Silicon Valley, but there's also a bit of European money too.
• Trade wars: The WSJ's William Mauldin provides some salient insights into U.S.-Canadian trade tensions, via new details about how private equity firm One Rock Partners convinced the U.S. Commerce Dept to impose tariffs on newsprint imports, for the benefit of a One Rock portfolio company (and to the detriment of U.S. newspaper publishers):
"The tariffs represent a remarkable success by a relatively little-known private-equity firm at pulling the levers of power in Washington for advantage."
• Steve Mnuchin to CNBC this morning: "As Treasury Secretary, i respect the independence of the Fed. I meet with Jay Powell on a weekly basis we talk about a lot of economic issues. it would be inappropriate for me to comment on interest rates in that position... I, for one, am not concerned about the yield curve. I don't think that's a predictor of economic growth, it's a market condition."
🚗 Uber raised $500 million from existing investor Toyota, as part of a deal to jointly develop self-driving car technology. http://axios.link/tl2m
• Shansong Express, a Chinese last-mile urban delivery company, raised $60 million in Series D-1 funding from 5 Capital, V Star Capital, Shihaisong Capital, Shunwei Capital, SIG, BHG Long Hills Capital, Lighthouse VC and Hearst Ventures. http://axios.link/Kfp0
• CargoX, a Brazilian on-demand trucking company, raised $60 million in Series D funding, Axios has learned. The Blackstone Group and Hudson Structured Capital co-led, and were joined by Goldman Sachs, Qualcomm Ventures, Soros, and Uber co-founder Oscar Salazar.
• PlanDay, a Danish workforce collaboration platform for shift workers, raised €35 million in Series C funding. SEB Private Equity led, and was joined by return backers Creandum and Idinvest. http://axios.link/dKFp
• Narvar, a San Francisco-based post-purchase customer engagement platform, raised $30 million in Series C funding. Accel led and was joined by fellow return backer Battery Ventures and new investors Salesforce Ventures and Scale Venture Partners. www.narvar.com
• Shadowfax, an Indian hyper-local delivery company, raised $22 million in Series B funding. NGP Capital led, and was joined by Qualcomm Ventures, Mirae Asset Management and return backer Eight Roads Ventures. http://axios.link/JImM
• Tascent, a Los Gatos, Calif.-based developer of “intuitive biometrics,” raised $19.5 million in Series B funding co-led by NEC Corp. and Tano Capital. http://axios.link/nIuC
• Indegy, an Israeli industrial cybersecurity company, raised $18 million in Series B funding. Liberty Media led, and was joined by Centrica PLC, OG Tech Ventures and return backers Shlomo Kramer, Magma Venture Partners, Vertex Ventures and Aspect Ventures. www.indegy.com
• Simple, an Australian marketing campaign management platform, raised US$17 million from BBRC Private Equity and Perle Ventures. http://axios.link/jp9I
• Foodsby, a Minneapolis-based corporate lunch delivery service that uses local restaurants, raised $13.5 million in Series B funding. Piper Jaffray Merchant Banking led, and was joined by return backers Greycroft Partners, Corazon Capital and Rally Ventures. http://axios.link/0aI6
• ZestMoney, an Indian digital lending platform, raised $13.4 million in Series A2 funding. Xiaomi led, and was joined by return backers PayU, Ribbit Capital and Omidyar Network. http://axios.link/4tVB
☕ Bellwether Coffee, a Berkeley, Calif.-based maker of zero-emissions coffee roasters, raised $10 million in Series A funding. Congruent Ventures led, and was joined by FusionX Ventures, Tandem Capital, New Ground Ventures, Hardware Club and XN Ventures. http://axios.link/YnrY
• VGS, a San Francisco, Calif.-based data security startup, raised $8.5 million in Series A funding. Andreessen Horowitz led, and was joined by NYCA, Vertex Ventures, Slow Ventures and Max Levchin. www.verygoodsecurity.com
• DrayNow, a Philadelphia-based marketplace for intermodal shipping brokers and motor carriers, raised $5 million in Series A funding. Comcast Ventures led, and was joined by Osage Venture Partners. www.draynow.com
• Exabel, a Norwegian maker of an automated monitoring tool for finance pros, raised $4.7 million in new seed funding from Vatne Equity, Andenæsgruppen, Sanden, Melesio Capital, Axan Invest, First Partners Holding 5, Holta Invest and LT Invest. www.exabel.com
• Advent International plans to invest around $486 million into Walmart’s Brazilian business, in which it recently acquired an 80% stake. http://axios.link/V3CE
• Apollo Global Management agreed to buy a portfolio of non-performing loans from Bank of Cyprus for €1.4 billion. http://axios.link/AZ2n
• Arlington Capital Partners acquired the government communications business of Black Box Corp. (Nasdaq: BBOX), which will be renamed Tyto Athene. http://axios.link/Ew8J
• FFO Home, a Fort Smith, Ark.-based portfolio company of Sun Capital Partners, acquired Service Furniture and Bedding, a Fairdale, Ky.-based operator of home furnishings and bedding retailers in the Louisville area. www.ffohome.com
• HKW acquired Urban Armor Gear, a Laguna Niguel, Calif.-based maker of rugged protective cases for mobile devices. www.urbanarmorgear.com
• Kindercare, a Portland, Ore.-based childcare provider owned by Partners Group, has acquired Rainbow Child Care Center, a Troy, Mich.-based operator of 150 childcare centers in 16 states, from Quad-C Management. http://axios.link/ig6G
• SoftBank Vision Fund is investing over $100 million for a 51% stake in a joint venture with the international arm of Chinese insurer ZhongAn (HK: 6060). http://axios.link/lIJ7
• Yellow Wood Partners agreed to buy Paris Presents, a Gurnee, Ill.-based maker of branded cosmetic and bath accessories, from EagleTree Capital. www.parispresents.com
🚑 Alzheon, a Framingham, Mass.-based developer of small-molecule therapies for Alzheimer's disease, filed for a $70 million IPO with ThinkEquity as lead underwriter. The pre-revenue company, which has raised around $27 million in VC funding from firms like Ally Bridge Group, withdrew a prior IPO filing earlier this year, which was being led by Citi and Piper Jaffray. http://axios.link/2ByJ
⛽ Coronado Coal, a Wilton, Conn.-based coal miner owned by Energy and Minerals Group, is prepping an Australia IPO that could value the company at around A$3 billion, per Reuters. http://axios.link/Yk1u
• Livent, a Philadelphia-based maker of lithium batteries for electric vehicles, filed for a $100 million IPO. It plans to list on the NYSE (LTHM) with BofA Merrill Lynch as lead underwriter. Livent is being spun out of FMC Corp. (NYSE: FMC), and reports $70 million of net income on $211 million in revenue for the first half of 2018. http://axios.link/x7mi
• VMWare (NYSE: VMW) agreed to buy CloudHealth Technologies, a Boston-based multi-cloud management platform. Reuters reports a $500 million price-tag, but we hear it’s at least a bit higher. CloudHealth had raised around $85 million, most recently at a $350 million post-money valuation, from firms like 406 Ventures, Kleiner Perkins, Meritech Capital Partners, Sapphire Ventures and Scale Venture Partners. http://axios.link/8JMd
• Atlas Copco (Sweden: ATCO) agreed to buy the cryogenic business of Brooks Automation (Nasdaq: BRKS) for $675 million in cash. http://axios.link/MWd0
• Flatiron School, a coding bootcamp acquired last year by WeWork, has purchased Designation, a Chicago-based for-profit UX and UI education school. http://axios.link/IdcP
• Truckstop.com, a New Plymouth, Idaho-based freight matching company, acquired D&S Factors, a Fruitland, Idaho-based factoring service for the transportation industry. www.truckstop.com
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