Credit
By Dinah
Cencig
2022 continued a
busy hiring trend across credit that has now slowed down since the beginning of
Covid in 2020. The biggest driver in buy-side credit recruitment is across
direct lending: Morgan Stanley Investment Management hired Mark Jochims from
Arcmont to build their private debt offering in Europe in January 2022. He has
since followed up with two MD hires and various Vice Presidents and Associate
hires to cover the European continent. Fidelity has further grown their private
credit offering since acquiring Michael Curtis’ CLO business and have now hired
a Head of Direct Lending from the Bank of Ireland. They will soon bolster the
team with a senior UK and DACH hire. Other notable moves indirect lending is
Mark Spangenberg moving from Alcentra to Arcmont (to cover DACH) and Cecile
Ferrie-Davies, MD, leaving Hayfin to join Pimco to help them with their French
coverage. In addition, primary CLOs have had a busy quarter with various new
entrances in the European CLO market: Bluebay lost Rajat Mittal, CLO PM, to
Signal Capital to build their European CLO offering. In addition, Carlyle
acquired CBAM’s $15bn of predominately CLO assets to make the US private equity
player one of the dominant CLO houses on the street. In another consolidation
move, Alliance Bernstein bought CarVal and T. Rowe Price acquired a majority
stake in OakHill Advisors backend of 2021. As such the movement of asset
management firms trying to grow their private credit offering by acquiring
boutique businesses is not slowing down.
Also on the
special sits / distressed credit side, the market has seen multiple moves: Stan
Fedorenko, ex Centerbridge, resigned to join Hamza Lemssouguer’s new $1.3bn
credit fund launch Arini Capital. Otto Alaoui left CVC in late 2021 to join
Carlyle after CVC’s decision to merge their special sits credit and direct
lending efforts into one. Ian Jackson at Carlyle, who ran their European
distressed credit business, is set to leave Carlyle in June 2022 after Carlyle
decided to merge their liquid and illiquid credit business under one umbrella.
Attestor Capital hired Fahmi Anar from Davidson Kempner to run their Norther
European coverage effort. With such hiring activity across the market, we have
seen a jump in total compensation numbers, especially driven by hikes of up to
30 percent for the base salaries of Associates. Given the search for returns
and turbulent times ahead for the public equity markets, we do not expect
hiring across credit to slow down until Q3 2022.
Real
Estate
By Ben
Ingram and Samantha Williams
As we return to
business as usual after 2 years of legal COVID restrictions, investment in the
Real Estate market continues to grow across a broad range of assets. Following
the end of compulsory mask-wearing and social distancing measures, the retail
sector is staging something of a comeback. The UK market has highlighted this
as CBRE’s acquisition of GWM – a consultancy firm to over 60 retail brands –
for an undisclosed fee in February this year demonstrates. Despite fears of the
High Street’s demise, there still seems to be a market for retailers, outlets,
and shopping centres to sell their wares to a population who are eager to get
back to normal living.
While industrial
and logistics, datacentres and the living sectors enjoy continued success, life
sciences are increasingly being considered a vogue sector. Although the full
extent of life sciences as an investable asset class and the depth of in-sector
talent remains uncertain, it is fast becoming an area of priority focus for
Real Estate investors. Trinity Investment Management’s recent takeover of
Cambridge’s Grafton Shopping Centre for a joint life sciences venture with
Angelo Gordon – the latest addition to a large portfolio of life sciences
assets – is a testament to this sea change in UK Real Estate investing.
Real Estate Debt
continues to be a busy and competitive market. Debt funds are looking to move
down the risk curve and broaden their offering with Abrdn even announcing an
unusual open-ended fund. Others, including private equity houses and
institutions, are looking to set up debt businesses - the likes of KKR, Ares,
Invesco and Delancey recently established themselves in this space. The upshot
is a hugely competitive market for senior and mid-level individuals or teams,
that can originate and execute deals. Carried interest remains a key incentive
to poach talented individuals from investment banks and institutions at the VP
level.
Infrastructure
By Hugo
Clark
With over $130bn
of capital raised globally in 2021, it was the biggest ever year for equity
fundraising in infrastructure & energy. It is interesting to note that the
number of funds closed has significantly dropped since 2018, down from 149 to
91. This consolidation is partly due to LPs being reluctant to invest in first-time
funds (take DIF’s recent pausing of their debut debt to fundraise), and instead
opting for the security of track records in such a competitive market.
Nevertheless,
fundraising momentum has continued into 2022 with the likes of KKR closing
their largest-ever fund at $17bn, NextEnergy closing $896m for NP3 (beating its
$750m targets), InfraVia closing €5bn for their 5th flagship fund (beating the
€3bn target), and Digital Bridge closing their second flagship fund at $8.3bn
(beating their $6bn targets). No prizes if you can spot the theme here. Other
notable examples include Allianz first closing €880m for their latest European
infrastructure fund, I Squared are a few weeks away from closing their 3rd fund
at $15bn, and ICG closing its first equity fund at €1.5bn.
In addition to
equity, infrastructure debt has grown markedly since 2019 (despite the
pandemic) with the 20 largest GPs raising $20bn more than the $105bn raised the
previous year. Unsurprisingly, sector specialists like Blackrock, AMP Capital
(although now part of Ares), AXA, Macquarie, Allianz & GIP still dominate
the debt space. The growth of infrastructure debt has not gone unnoticed by
European players, many of whom are now looking to raise either first time or
new vintages. Paris based SCOR has just announced they are targeting €750-1bn
for their 4th fund. CIP started raising for their first-ever debt fund last
year, going public in January with their €1bn target, and Zurich based SUSI
Partners are targeting €600m for their 3rd debt fund.
With all this
fundraising comes lots of hiring, with the theme of the team moves continuing
into 2022. We have previously seen large asset managers like Patrizia &
Schroders expanding their infrastructure capabilities with the acquisitions of
Whitehelm & Greencoat, respectively. This quarter we saw the completion of
AMP’s debt team move into Ares Management, and then at the very end of the
quarter, it was announced that HSBC AM had poached AMP’s entire listed
infrastructure team. The team, led by Giuseppe Corona, is split across London
& Sydney and will report to Alternatives CEO Joanna Munro. It will be
interesting to see whether there’s a further exodus from AMP’s wider
business.
On the individual
front, there are lots of activity across the entire sector, at all levels
across investing (equity & debt) and asset management. As usual, the most
movement was at the Associate level with GIP, Arcus, Basalt, Brookfield, CPP
Investments, Fiera Infrastructure, and IFM (to name a few) all making hires
into their investment teams. Some notable mid & senior level moves include
Will Cunneen joining Abrdn’s core infrastructure team from Macquarie as an
Investment Director. On top of the hiring spree in 2021, Kiril Prodanichin has
joined Antin’s NextGen strategy as an Investment Director from Wren House. EIG
brought in Etienne Renault as a VP from GIG and InfraCapital made two hires,
bringing in Lee Hamano-Crossingham and Giorgiana Wegener as Asset Management
Directors. Columbia Threadneedle lost their Head of Origination &
Investments, Antonio Botija, to H.I.G, where he joins as a Managing Director in
London, bolstering their already more than 20 strong team across London &
New York. And finally, there’s been a change of guard at 3i with Managing
Partner Phil White moving to Vice Chairman, and Partners Bernardo Sottomayor
& Scott Moseley becoming Co-Heads of infrastructure.
Private Equity
By Olly
Blaydon
Even though the
Real Estate and Credit markets are starting to look more closely at building
in-house teams, their grasp of what’s possible through data and digital
technologies is still very immature. There are notable exceptions (Starwood,
Blackstone, Oaktree and Signal Capital for example) but they are very much
outliers, for now.
We find ourselves
addressing two main themes in meetings with Real estate and Credit funds:
First, digital transformation and data science have become catch-all terms to
describe an evolving series of changes, technologies and systems. Packaging it
all in one phrase is unhelpful and deceptive. The traditional real estate
investment and management industries face huge efficiencies through
modernisation and data analytics; credit portfolios do not but will be revolutionised
by deep neural networks and quantum computers. Second, this is unlikely to be a
bubble. A lot of .com revolved around exciting software which just couldn’t run
on the low-bandwidth networks and small processors we had. These engineering
issues aren’t a problem for data science and the digital technologies behind
the change we have now.
Private Equity
continues to convert digital transformation into the increased valuation. We’re
co-hosting a Roundtable of the Partners responsible for data and digital in the
GP and Portfolio with EQT in May and the invite list is 48 people, two years
ago this would have been less than half of that number. Hiring a CIO / CDO and
CTO in the portfolio is the theme now. The people in the Operating Group can no
longer cope with demand and the assets need their own people.
Venture
Capital
By Hugh
Barren
One of the most
interesting trends we are seeing across European VC is how the funds themselves
are thinking about helping their portfolio companies and winning deals with
more than just capital. After speaking with a couple of funds lately, they
outlined different scenarios where founders were happy for them to invest not
just because of the amount of capital and their background as investors.
Different scenarios included being able to hire and bring a wealth of top-level
engineering talent from around the globe. Another firm we spoke with, claimed
to be specialists in public relations and their pitch to founders is based
along the lines of ‘let us invest and we will take care of all PR matters as
well. As the deals become more competitive, VCs are continuing to think of
different ways to deliver value to their portfolio.
Access to capital
is another large topic VCs have been considering much more. We are starting to
see funds looking to develop their own in-house investment banking divisions.
Whether that is to help a capital raise, prepare for an IPO or offer support
once public, this ties into the increasing trend of VCs wanting to support the
best companies, for as long as possible, providing they are still founder-led
businesses. One VC, we spoke with told us of their team who spent three months
working from their portfolio company’s offices, day in day out preparing them
for their IPO. This function saves start-ups investment banks fees, but also
offers an unparalleled level of support for businesses looking to embark on
large strategic initiatives
Distribution
By Roger
Threlfall
As we finish Q1
2022, irrespective of what is happening from both a geopolitical or
inflationary perspective, the amount of hiring across the broad private markets
spectrum has not eased up, which includes the demand for fundraisers. Whether
it is the US or Asian managers having a footprint in London by hiring a
fundraiser or it is the more established managers having a more
institutionalised set-up, where sales roles are now much more geographically
focused across Europe.
We continue to see
private markets firms in Europe move into a ‘newer’ client segment (wholesale)
to diversify their book of business away from pure institutional investors.
Trying to attract money from global private banks, discretionary fund managers
and family offices continues to be a big push this year from a recruitment
perspective. Global Private banks have shown huge interest in wanting to offer
their clients more illiquid products, creating a demand these private markets
firms will happily supply. Blackstone has the most established business
(Private Wealth Solutions) but others have been following suit.
A by-product of
the huge asset growth in private markets firms is the increased interest in
hiring private markets product specialists, particularly in the private credit
space due to the large variety of strategies. Firms can no longer rely on the
fund manager or the fundraiser to manage existing relationships or have
in-depth knowledge of every strategy, thus creating a demand for these product
specialists.
We also see no
let-up in the continued consolidation across the asset management industry,
with traditional asset managers keen to bolt-on private markets capability.
AB’s recent acquisition of CarVal Investors ($11bn alternative credit business)
is a great deal. Schroders acquiring Greencoat Capital, the specialist
renewable infrastructure business is a shrewd piece of business. Oaktree took a
majority stake in 17 Capital to tap into the ever-growing interest in the fund
financing space. A follow on from this is that traditional asset managers
continue to build out their alternative sales teams who work closely with the
regional relationship managers. Franklin Templeton, Wellington and Fidelity
have all recently / are in the process of hiring these salespeople.