This content is from: Portfolio

BlackRock Shakes Up The Private Equity Industry

The CIO of CalSTRS said over Twitter that BlackRock’s Long Term Private Capital fund may “change the dynamics” of the private equity market.

BlackRock, the world largest asset manager, said Monday it would begin investing in private companies with a new fund that is designed to be less risky than traditional buyout funds.

The firm’s private equity fund, Long Term Private Capital, has attracted $2.75 billion from investors to provide to “high-quality companies,” according to BlackRock’s statement. The asset manager said it has $1.25 billion in hand and that the rest of the committed capital will become available as the fund increases in size.

“This is HUGE news, it may change the dynamics of the PE market,” Christopher Ailman, chief investment officer of California State Teachers’ Retirement System, tweeted Monday. “New structure, new life, and new alignment with L.P.s. It WILL change the landscape.”

The BlackRock fund will target the “large population of strong, stable companies” that need long-term capital, but don’t wish to go public or become a target of a leveraged buyout, according to André Bourbonnais, who is leading the LTPC team. The firm has worked with “several major institutional clients” to customize the permanent pool of capital to their needs, according to the statement.

“We’re in the fund,” Mansco Perry, Minnesota State Board of Investment’s CIO, said in a phone interview. “The alignment of interest for limited partners is compelling.”

The pension last year discussed committing as much as $1 billion to BlackRock’s LTPC fund, according to minutes of a meeting in September. Perry declined to comment on the size of its commitment.

“For institutional investors who want equity exposure, there’s a need for an additional type of investment on the continuum between publicly traded equities and leveraged buyout style private equity — one that is potentially more rewarding than public equities but less risky than highly-leveraged buyouts,” said Mark Wiseman, chairman of BlackRock Alternative Investors, in the statement.

Buyout firms raise funds to purchase companies and finance those deals with a mix of equity and debt. They seek to exit their investments at a profit through a sale or initial public offering, returning capital to investors within the life cycle of their funds.

As a permanent pool of capital, LTPC is designed to be less volatile than other “private equity market constructs,” according to Wiseman. Having secured commitments from unnamed “cornerstone” investors, BlackRock said it has started additional fundraising for the “perpetual” pool.

A spokesman for BlackRock declined to disclose the fund’s investors.

The firm had about $6 trillion of assets under management at the end of December, according to the statement. LTPC sits inside BlackRock Alternative Investors, which oversees investment in real assets, private equity and private credit. 

Related Content