Welcome to the weekend, everybody. It’s been a busy few weeks down on the Ave. of Giants. Here are some of the top stories:
- The Fee Machine: The SEC announced last week that it would put the fees and expenses paid to private equity and hedge funds higher up the list of its priorities. In the meantime, the California State Treasurer wants to force disclosure of PE fees via new legislation, and some CIOs of pension funds have vowed not to invest with any GPs that do not completely disclose “historical and current fees and expenses.” The tables seem to be turning.
- Apropos: In case you missed it, Blackstone recently was forced to pay a $39 million settlement for overcharging its limited partners. The rumors I’m hearing are that there are a bunch more cases coming from the SEC in the months ahead. Pass the popcorn.
- Long Lemons: Endowments and foundations will reportedly ramp up their private equity co-investments with GPs in order to minimize fees and maximize returns. Based on some recent research, however, this strategy may perform worse than simple fund investments due to information asymmetries associated with the selection of deals by GPs to share with LPs. Buyer beware.
- Selfie: How do we fix the student loan crisis? I think it could start by helping university endowments make direct investments in their own students human capital.
- Overseas Offices: The trend towards Giants setting up overseas offices continues. For example, Oman has two sovereign funds that will be sharing an office in Tanzania. Norway’s SWF is setting up an office in Japan. Malaysia’s Khazanah has set up shop in London, which is also the new home of Korea’s massive National Pension Service. What’s going on? Here’s why these Giants are looking to get closer to the action.
- SDFs: Sovereign development funds seem to be the policy-du-jour in political campaigns. Here’s a new paper I did describing why these domestic investment vehicles have grown so popular.
- Ventures I: Temasek’s wholly-owned venture firm, Vertex, says it has a 30% IRR, which explains why Temasek is giving it more capital to invest.
- Ventures II: First State Super — $50 billion Giant in Australia — affirmed its commitment to venture and flagged fintech as an area of focus.
- Raison D’être: With oil prices low, big oil funds are building up liquidity in case their governments need it. As a reminder to people freaking out, this is pretty much exactly why these funds exist; they smooth commodity price volatility for their sponsors.
- Role Models: Harvard’s endowment sounds like it’s giving up on the endowment model. Again.
Have a great weekend!
