AGM Alts Weekly | 12.17.23
AGM Alts Weekly #32: Making private markets more public, every week.
👋 Hi, I’m Michael. Welcome to my weekly newsletter, the AGM Alts Weekly. Every Sunday, I cover news, trends, and insights on the continuing evolution and innovation in private markets. I share relevant news articles, commentary, an Index of publicly traded alternative asset managers, job openings at private markets firms, and recent podcasts and thought pieces from Alt Goes Mainstream.
Join us to understand what’s going on in alts so you and your firm can stay up to date on the latest trends and navigate this rapidly changing landscape.
Good morning from DC. It certainly feels like we are in the middle of the “alternatives era,” starting with news of a possible wave of 2024 IPOs for alternative asset managers.
PitchBook’s Andrew Woodman weighs in on the future of a number of the industry’s big players in his Weekend Analysis. Andrew reports that General Atlantic signaled its intention to go public, filing with the SEC this past week. A possible 2024 IPO kicks off speculation about others following suit. CVC has flirted with a public offering multiple times in 2023 but delayed their Amsterdam IPO due to market volatility. Others, such as Ardian and L Catterton, have previously mulled public offerings but have yet to pull the trigger.
With the continued growth of private markets — and the intensifying focus by alternative asset managers on the wealth channel — many firms could view a public listing as a way to not only tap into liquidity but also to prove that they are part of the mainstream financial system to what is becoming a widening set of investors in their products. A holiday video is another way to show that alts are reaching the mainstream — as Blackstone and Apollo’s holiday videos would suggest.
The current wave of prospective alternative asset manager (AAM) IPOs follows prior periods of public offerings from some of the industry’s largest firms. Blackstone, KKR, Apollo, and Carlyle all went public between 2007 and 2012, but initially, stock price performance was up and down. Over the long term, however, performance and appetite for listed AAM stocks have improved, paving the way for a number of other firms to consider going public. Europe saw a wave of public offerings from some of its largest AAMs, with Tikehau’s public debut in Paris in 2017. EQT, Bridgepoint, and Antin Infrastructure Partners followed suit over the next few years.
The fact that many alternative asset managers are seriously mulling public offerings highlights a number of important trends in the alts space:
(1) Accessing liquidity: Large firms are constantly examining and evaluating the different ways in which they can generate liquidity for their shareholders and properly compensate the next generation of emerging leaders within their organizations. Public offerings represent one such way for these firms to provide liquidity options to stakeholders and employees. A strong appetite for these stocks in public markets should only continue to strengthen the conviction of asset managers to decide to go public. The focus on liquidity for AAM business owners also explains why GP stakes are emerging as an increasingly prominent topic within the alts space. GP stakes provide another path to liquidity for business owners and help with the generational transition of leadership.
(2) Multi-strategy platforms command more value: The public markets value multi-strategy platforms better than single-strategy platforms. This fact shouldn’t come as a surprise, as diversified strategies mean that the platform can generate revenues from management fees (fee-related earnings) irrespective of the private market fundraising environment. In some years, private credit strategies will have fundraising success. In other years, private equity will. This can partially explain the push for platforms to acquire specialized strategies and tuck them into a broader platform. The liquidity achieved from a public offering can help provide larger platforms with the capital to acquire more specialized strategies as they expand their platform while also potentially increasing their multiple.
PitchBook’s Q3 2023 Public PE and GP Deal Roundup highlights some of the recent alternative asset manager acquisitions or GP stakes investments over 2023.
(3) Being in the public eye may help efforts with the wealth channel: It’s no secret that many of the large alternative asset managers view the wealth channel as a major growth driver for their firm. It’s why Blackstone has built a team of over 300 people focused on private wealth. It’s why Apollo has made the wealth channel one of their most significant strategic priorities. It’s why many firms, including Blackstone with Blackstone University and Apollo with Apollo Academy, have invested heavily in educational initiatives. It’s why virtually all of the large firms have bolstered their distribution teams with hires specifically for the wealth channel (see the “Who is hiring” section below for job postings from Apollo, John Hancock, and BMO Asset Management in this category). And it could explain why Blackstone and Apollo created holiday videos that appear to make them accessible and relatable to every investor (watch Blackstone’s video, "The Alternatives Era," here, and Apollo’s video, "No New Toys," here).
It’s easy to poke fun at Blackstone’s holiday video about the “Alternatives Era, ” which paid homage to Taylor Swift, whose “Eras Tour” grossed an astronomical $1B in 2023.
But taking a step back, Blackstone and Apollo are trying to humanize private markets in their own distinct ways. Why? Because both Blackstone and Apollo have a deep understanding that a meaningful portion of the next wave of growth for their respective firms comes from the wealth channel, where the end client is the individual investor. Blackstone and Apollo are not B2C companies, but they do own many companies that sell directly to consumers, and they certainly know that their end customer in the wealth channel is the individual consumer (see last week’s AGM Alts Weekly here to read more about what it means for private markets firms to focus on the individual investor).
I’d encourage everyone to watch both holiday videos and look past the levity. Listen closely to what they say. The portfolio companies they highlight and the words they use are very much intentional. They understand that making private markets accessible and part of the mainstream is what will make the next wave of investors come into the space.
Taken together, all of these actions point to the continued mainstreaming of alternatives. Going public reinforces that alternative asset managers are a part of mainstream financial services, which should help them continue to build their brand within the wealth channel.
The consumerization of alts is in full force. I expect that we’ll continue to see large alternative asset managers find ways to connect with the end consumers of their products — whether it be by going public or by making holiday videos.
AGM Index
AGM has created an Index to track the leading publicly traded alternative asset managers.
Some of the industry’s largest alternative asset managers are publicly traded — and their net inflows can serve as a window into how private markets are being perceived by investors and allocators who are allocating capital into alternative investments.
Note: AUM figures are based on fee-paying AUM where applicable.
AGM News of the Week
Articles we are reading
📝 Apollo Plans Credit Product With $2,500 Minimum Investment | Miles Weiss, Allison McNeely, Bloomberg
💡Apollo continues to innovate in the wealth channel. This week, Bloomberg’s Miles Weiss and Allison McNeely report that Apollo is in the process of launching a credit product that will enable investors to invest into their fund at a $2,500 minimum investment. The lending platform, Apollo Asset Backed Credit Co., plans to fund and structure debt securities backed by different types of loans to individuals and businesses. The vehicle, which is structured as an operating company rather than an investment fund, will offer accredited investors access to a diversified pool of loans, including personal loans, auto loans, royalties, residential and commercial mortgages, aircraft loans, and net-asset-value loans to private equity funds. This fund is part of Apollo’s broader growth aspirations of hitting $1T AUM by 2026, as they view originating private debt investments as a major driver of growth. Last year, Apollo originated $100B of credit assets across the firm and its 16 origination partners.
Notably, this new vehicle may look to individual retirement accounts as a source of capital. Apollo structured the vehicle as an operating company rather than an investment fund in part because of the potential to take in capital from IRAs. This news is not the first of Apollo looking to create a fund to enable investors to access their investment strategies at low minimums. In June, Apollo filed to create an infrastructure investment company with a similar setup. Apollo’s product structuring innovation represents part of a broader trend of large alternative asset managers looking to unlock access to private markets for individuals. These firms have all made a concerted effort to focus on the wealth channel, building educational content, teams, and product structuring initiatives to serve this investor cohort properly.
💸 AGM’s 2/20: Alts going mainstream — and downstream. The vision that many have for alts is the ability for allocations of any size to be made by any investor type. Sure, there will be investment products that don’t — and shouldn’t — be part of every investor’s portfolio due to either liquidity, risk, or return parameters, but the next step-function change for private markets is the ability to lower investment minimums on many investment products. Perhaps no news embodies this concept of the mainstreaming and downstreaming of alts more than Apollo, one of the industry’s largest players, creating a product that will enable investors to access their credit product at a $2,500 minimum. The true mainstreaming of alts will come when investors can participate in both funds and direct investment opportunities at single-dollar investment minimums, much like we’ve seen happen with the fractionalization of public market securities. It will take time to achieve this vision — and much of that future reality is predicated on technology innovation that solves the administrative burdens required with managing, tracking, and reporting on investors’ alts positions. But the drumbeat of innovation is starting to pick up its pace — and there are a number of firms who are continuing to push the industry forward.
📝 SumUp defies fintech slowdown with $306.5M round | Andrew Woodman, PitchBook
💡The European startup ecosystem is showing signs of life, with SumUp’s formidable financing round putting an exclamation point on the end of 2023 for the region. PitchBook’s Andrew Woodman reports that London-based fintech SumUp raised €285M ($306.5M) in a growth round led by Sixth Street Growth amidst a slowing environment for fintech capital raising in Europe. This round comes 18 months following SumUp’s prior raise of €590M in equity and debt at an €8B valuation in June after hoping to raise at a €20B valuation in 2022. SumUp’s business performance, which has been 30% YoY revenue growth since Q4 2022, enabled the company to command a higher valuation than the prior round. SumUp’s fundraise represents one of the largest VC rounds for a European fintech this year amidst a backdrop of falling fintech deal counts in Europe, with a total of 314 deals closed in Q3 2023 versus 341 closed in Q2. Q3 2023 also marked the second consecutive quarter of falling deal value, with around €3.2B in total deal value for the sector. This figure pales in comparison to a peak of €8.71B invested across 443 deals in Q2 2022.
💸 AGM’s 2/20: The European startup ecosystem has shown a number of signs of life in recent weeks, with some large rounds being completed. Following the news of Mistral AI’s $415M round, SumUp’s recent raise illustrates that investors are still — selectively — backing companies at growth stage in Europe. FinTech is one of Europe’s strengths, with a number of successful companies, including Adyen, Klarna, Checkout.com, Revolut, and many others coming out of the region. Payments represents a massive opportunity in Europe, so it’s not a surprise that investors are willing to get out the checkbook for a company like SumUp. SumUp posted a profit in 2021 on €100M of revenue, making the company only one of four profitable fintechs alongside Revolut, Zepz, and Lendable. SumUp’s successful fundraising round could also be a sign of things to come for Europe’s startup ecosystem. If markets continue to pick up, it’s possible we could see a number of European companies, including Zopa, Klarna, FlixBus, and others go public in the new year and see companies at growth stage start to complete funding rounds at a pace that we did not see in 2023.
📝 EQT tops Bundesliga media rights bidding at $14bn, trailed by CVC, Blackstone, and Advent | Private Equity Insights
💡The Bundesliga, Germany’s main soccer (football) league, is in a hotly contested bidding war amongst a a few of the industry’s largest private equity firms looking to take a stake in their broadcasting rights. According to Bloomberg News Network and Private Equity Insights, EQT AB is currently the leading horse in the race to take a stake of up to €1B in the media rights business of the Bundesliga. Thus far, the Nordic PE firm has presented the highest offer, with an initial proposal valuing the unit at roughly €12.7B ($14B). CVC Capital Partners (€12.7B / $13.8B), Blackstone (€11.9B / $13.1B), and Advent International (€10.8B / $12.2B) have all come in with lower bids. It’s possible that conflicts of interest could cause complications for potential buyers. David Blitzer, a senior executive at Blackstone, owns a stake in German football club FC Augsburg. CVC has investments in France’s Ligue 1 football league as well as Italy’s Serie A. The DFL’s supervisory board will reportedly meet in the coming days to consider the bids and work through the pros and cons of each investor’s offer.
💸 AGM’s 2/20: European soccer continues to be a major interest area for some of the world’s largest private equity firms. The Bundesliga is the latest target in the crosshairs of private equity. One of the world’s top leagues, the Bundesliga’s revenues only trail England’s Premier League. This prospective investment by private equity affirms what’s been a recurring theme in sports investing — that sports is viewed as entertainment from an investment perspective. One of the private equity firms involved in the bidding process, CVC, is no stranger to investment into top sports leagues, having invested in France’s Ligue 1, Spain’s La Liga, Premiership and Six Nations Rugby, the Women’s Tennis Association, and Formula 1. Private equity investors look across the pond to the US, where they see NFL and NBA franchises exceed the value of most European soccer clubs despite soccer being a much more popular game globally. Perhaps an investment here by private equity into the Bundesliga will help the league gain a bigger global footprint than it already has created. Preeminent lecturer in football finance, University of Liverpool’s Kieran Maguire highlights both the opportunities and the challenges that private equity firms will face if they invest and aim to internationalize the Bundesliga’s brand. Maguire cites the investment that Premier League clubs have made in doing overseas tours for decades, not to mention that they have the advantage of the English language. Maguire thinks that German clubs will have challenges competing for attention, remarking, “Fans only have a limited number of 90-minute slots available per weekend and once they've been locked into the Premier League ecosystem, watching Manchester United, Liverpool, Tottenham, Arsenal and Chelsea on a regular basis, where is the room in their life to watch Werder Bremen vs. Eintracht Frankfurt?” While I recognize Maguire’s point that there’s only so much time in people’s schedules, German soccer is both an exciting brand of the sport to watch, and the German fans are some of the most passionate fans I’ve come across. Therefore, while it will certainly be a challenge for them to compete with Premier League clubs for fans globally, I wouldn’t bet against the Bundesliga. Speaking of the fans, the potential involvement of private equity into the game does raise questions as to how fans’ considerations will be put first. There’s talk that fans are skeptical of private equity investors coming in and taking a stake in the league. Some, such as Frankfurt School of Finance & Management Professor and Director at its Institute for Private Equity and Mergers and Acquisitions Michael Grote, note that private equity involvement may actually protect and preserve member (read: fan) control at the club level. The DFL consists of 36 independent clubs across two leagues, many of which are bound by the 50+1 rule, which stipulates that the clubs must retain majority voting rights in the commercial companies. This structure enables the matchday experience to remain affordable and prevents the clubs from being sold to the highest bidder, but that may deter private equity from investing because it removes their ability to control the clubs as coordination both with fan owners and with other clubs can become a challenge. It will be fascinating to see what ends up happening with the Bundesliga and how a private equity investment turns out, as sports continues to be at the top of many private equity firms’ list of investments to make.
Reports we are reading
📝 BlackRock’s 2024 Private Markets Outlook: Opportunities in Mega Forces | Edwin Conway, Lynn Baranski, Mark Everitt, James Keenan, Anne Valentine, BlackRock
💡BlackRock released its 2024 private markets outlook. They aim to make sense of the continuing uncertainty facing investors and put that in the context of a number of structural changes or “mega forces,” as they call them, offer attractive investment opportunities for private markets.
Among the key trends that BlackRock highlights are: digital disruption and AI, the low-carbon transition, demographic divergence, the future of finance and geopolitical fragmentation.
BlackRock sees opportunities ahead based on a few structural trends that are reshaping private markets:
Banks are reducing their loan volume with lending standards tightening.
Companies staying private longer. More prominent place for private markets in the broader economy. Private markets can provide more targeted exposures to different sectors.
Record dry powder numbers, amounting to $4T, means that capital will move off the sidelines in 2024.
Assets appear to be on track to reprice at what should be attractive entry points for new vintages.
BlackRock’s report dives deep into a few mega forces that they believe will propel private markets going forward:
(1) Infrastructure = Low-carbon transition.
(2) Private debt = Future of finance.
(3) Private equity = AI / digital disruption.
(4) Real estate = Demographic divergence.
There’s an expectation of a partial reopening of IPO markets in 2024. If IPO markets don’t return, then investors will need to find other ways to generate exits, which will lead to increased activity in secondaries markets.
Infrastructure 2.0
There will be a demand for data centers as the more the world becomes digital, the more this transformation requires physical infrastructure to be built. The increasing demand for high-speed internet drives the need for more fiber that needs to be in the ground.
Energy and industry are becoming more local as geopolitical concerns intensify. Nearshoring and manufacturing moving home will define and reshape industry, real estate, and logistics industries.
Clean energy will continue to move into focus, both for geopolitical and industrial reasons. BlackRock Investment Institution Transition Scenario predicts that low-carbon sources will make up 70% of the world’s energy by 2050. Energy storage, electrified transport, and alternative fuels for aviation and shipping should continue to see technological advances that result in lower costs and increased efficiency.
Private Debt
BlackRock predicts growth from $1.6T today to $3.5T by 2028. Private credit is an increasingly essential asset within private markets, representing 12% of private markets AUM. Drivers of expansion include:
(1) Borrower preferences for customized funding solutions, certainty of execution, flexibility of long-term borrower / lender relationship.
(2) Investor desires for diversification.
(3) Structural shifts in public markets, which are now focused on serving larger borrowers, meaning that public debt market deal sizes are prohibitively large for many middle-market companies.
(4) Continued contraction in bank credit availability, allowing for further expansion of private debt’s addressable market of borrowers.
Nuanced and defensive approach to investing, including structural protections, granularity in underwriting, and credit selectivity, will all be critical in 2024 for maintaining attractive all-in yields. Higher cost of capital will impact sectors and firms differently, so this will be a driver of dispersion, not disruption.
Expect real state debt categories like industrial, self-storage, hotel, and non-mall retail to benefit from solid business fundamentals, demographic trends, strong demand, and structural shifts.
Middle-market companies are increasingly turning to private debt markets as a viable path for funding.
Private Equity
Private equity is in a period of adjustment with higher rates and market uncertainty. BlackRock believes in the asset class, given its historical outperformance in times of uncertainty.
Deal activity was muted in 2023, largely due to valuation dislocation between public and private markets.
Public to private transactions are becoming more commonplace as companies are looking to build in private and grow their valuations absent of the volatility of private markets.
There’s an increasing equitization of transactions. Less availability and higher cost of debt has meant private equity buyers have had to increase equity contributions, with 2023 the first time that the average equity contribution has been well over 50%.
There’s a demand for quality. Economic headwinds and rising costs of capital have re-focused PE buyers on industry-leading companies with strong cashflows and return on capital. Tech and healthcare have proven resilient in this period.
Is now a good time to buy? Prices could now make private equity an attractive place to deploy capital.
Who is hiring?
In order for alts to continue to go mainstream, we need the best talent to go into the space. Here are some openings at private markets firms. If you’d like to connect with any of these teams, let me know and I’m happy to facilitate an introduction if appropriate. If you’re a company or fund in private markets, feel free to reach out to share a job description you’d like to be listed here to highlight for the Alt Goes Mainstream community.
🔍 Apollo (Alternative asset manager) - Distribution & Wealth Services Associate. Click here to learn more.
🔍 John Hancock / Manulife (Insurance & investment solutions provider) - Alternative Investment Specialist. Click here to learn more.
🔍 BMO Global Asset Management (Global bank & asset manager) - Vice President, Private Equity. Click here to learn more.
🔍 iCapital (Private markets infrastructure investment platform) - Midwest, Regional Director, Senior Vice President. Click here to learn more.
🔍 Republic (Multi-strategy alternative investment platform) - Chief Technology Officer. Click here to learn more.
🔍 Isomer Capital (European VC fund of funds) - Investor, Secondaries. Click here to learn more.
🔍 Northzone (Global early-stage VC) - Investment Team, Stockholm office. Click here to learn more.
The latest on Alt Goes Mainstream
Recent podcast or video episodes and blog posts on Alt Goes Mainstream:
🎥 Watch Lawrence Calcano, Chairman & CEO at iCapital, and I take the pulse of private markets on the fifth episode of our monthly show, the Monthly Alts Pulse. We discuss the rising interest of alts around the world. Watch here.
🎙 Hear how Shannon Saccocia, the CIO of $67B AUM Neuberger Berman Private Wealth, thinks about the changing role of alternatives in client portfolios. Listen here.
🎥 Watch the replay of the fireside chat at Future Proof decoding the rise of alts with some of the most influential players in private markets: Stephanie Drescher, Partner, Chief Client & Product Development Officer, and member of the Leadership Team at Apollo, and Shannon Saccocia, the CIO at Neuberger Berman Private Wealth. Watch here.
🎙 Hear Chris Ailman, the CIO of $307B CalSTRS, discuss how he manages a portfolio with ~40% exposure to private markets. Listen here.
🎙 Hear Chase Griffin, a QB at UCLA and the NIL Male Athlete of the Year, share thoughts on how private equity and the NIL are changing the game for collegiate and professional sports. Listen here.
🎙 Hear Jamie Rhode, Principal at family office Verdis Investment Management, on how to drive the most meaningful returns in early-stage venture as a LP. Listen here.
🎙 Hear Maelle Gavet, CEO of Techstars, take the pulse of seed and how Techstars has created an actively-managed index of innovation. Listen here.
🎥 Watch a roundtable on the European institutional LP vantage point on the current fundraising environment for VCs in Europe. EUVC, a top podcast championing European venture and fund syndicate platform, brought together leading institutional LPs in the European ecosystem, David Dana, Head of VC Investments at EIF, Joe Schorge, Co-Founder & Managing Partner at Isomer Capital, Christian Roehle, Head of Investment Management at KfW Capital, and me to discuss how GPs in Europe can navigate a difficult fundraising environment. Watch here.
🎙 Hear Joe Schorge, Co-Founder & Managing Partner at one of Europe’s most active LPs, Isomer Capital, discuss why now is Europe’s time. Listen here.
🎥 Watch Marc Penkala, Co-Founder & Partner at Altitude, and I do a first-of-a-kind live podcast on EUVC. EUVC, the leading podcast championing European venture and fund syndicate platform, brought together one of their portfolio GPs, Marc Penkala of Altitude, and me for a VC / LP pitch session. Watch here.
🎙 Hear the incredible story of “tech’s most unlikely venture capitalist,” Pejman Nozad, Co-Founder & Founding Managing Partner of Pear VC, on how they’ve built a seed investing powerhouse. Listen here.
🎙 Hear sustainable investments pioneer Bill Orum, Partner of $9B AUM OCIO Capricorn Investment Group, discuss how Capricorn has proven that doing well and doing good don’t have to be mutually exclusive. Listen here.
🎙 Hear wealth management industry titan Haig Ariyan, CEO of Arax Investment Partners, share his thoughts on the private equity opportunity in wealth management and why the intersection of wealth and alts is one of the biggest trends in private markets. Listen here.
🎙 Hear investing legends John Burbank and Ken Wallace of Nimble Partners provide a masterclass on investing with a macro lens from John’s background as a leading macro hedge fund manager at Passport Capital and on micro VC from Ken’s background backing some of the top emerging VCs at Industry Ventures. Listen here.
🎙 Hear $40B AUM Cresset Co-Founder & Co-Chairman Avy Stein and Director of Private Capital Jordan Stein live from the Allocate Beyond Summit discuss how private markets are changing wealth management. Listen here.
📝 Read how 73 Strings CEO & Co-Founder Yann Magnan and team are leveraging AI to build a modern and holistic monitoring and valuation platform for private markets in The AGM Q&A. Read here.
🎙 Hear $18B AUM Savant Wealth’s award-winning CIO Phil Huber talk about how LPs can build a strategy for investing in private markets. Listen here.
🎙 Hear Avlok Kohli, AngelList’s CEO, talk about how they are building the company of companies that is powering private markets. Listen here.
🎙 Hear Seyonne Kang, Partner and member of the private equity team at $134B AUM StepStone, discuss how the VC industry is dealing with today’s venture market. Listen here.
🎙 Hear Robert Picard, Head of Alternatives at $117B AUM Hightower, approaches alternative investments. Listen here.
Thank you for reading. If you like the Alts Weekly, please share it with your friends, colleagues, and anyone interested in private markets.
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If you have any suggestions, would like me to feature an article, research, or would like to recommend a guest or topic for the Alt Goes Mainstream podcast, reach out! I’d love to include it in my next post or on a future podcast.
Special thanks to Michael Rutter and Nick Owens for their contributions to the newsletter.