Pensions dim on US private equity

One scoop to start: Leda Braga’s Systematica Investments, one of the world’s best known computer-driven hedge funds, is suffering its worst ever losing streak in its flagship fund, as the market turmoil triggered by the trade war catches out many of the industry’s biggest names.

And another thing: Meta’s acquisitions of Instagram and WhatsApp helped give it “monopoly power”, the US Federal Trade Commission told a court on Monday at the start of a blockbuster trial that could force the $1.5tn tech giant’s break-up.

In today’s newsletter:

Trump’s tariffs spook global pensions

CVC weighed a private credit takeover

Silver Lake snaps up Intel’s chip unit

Private capital takes another hit

Private capital titans in the US were in a tough position heading into a new presidential administration this year. A global trade war has made their position all the more precarious.

The industry’s assets — for the first time in decades — were shrinking before Donald Trump took office.

Investors sitting on a $3tn backlog of ageing and unsold deals have retrenched from committing new funds. Many were already feeling a strain on their liquidity.

But that was just the beginning of their troubles. Now, the global trade war accelerated by the White House is prompting pension funds in Canada and Europe to reassess their investments in private capital firms in the US.

Big institutional investors are rethinking their exposure to the US amid the president’s erratic trade policy blitz. Trump has also vowed to purchase Greenland from Denmark and threatened to make Canada the 51st US state.

Those threats haven’t landed well.

Huge pension funds such as the Canada Pension Plan Investment Board, which has C$699bn (US$504bn) in assets, is among those evaluating its approach to the US.

Meanwhile, one of Denmark’s biggest retirement funds has paused new investments in US private equity.

The fund made the call to pare back its investments over the US’s general instability, but also because of its recent threats to take over Greenland, a semi-autonomous territory which Denmark controls.

CPPIB’s trepidation over investing in the US, in particular, is a huge blow to the private equity sector.

The fund had close to $50bn of investments in US dollar-denominated private equity funds at the end of September, including those run by Silver Lake, Carlyle and Blackstone, according to an FT analysis of public data.

While there’s a lot of unease, not everyone’s fleeing. Another big Canadian pension fund told the FT it plans to keep US exposure.

Caisse de dépôt et placement du Québec, which has C$473bn of assets, says it’ll keep half of its private equity portfolio in the US. The reasoning? Basically everywhere’s volatile.

“It’s tough to invest everywhere these days,” said Martin Longchamps, head of private equity and credit at the fund.

Private credit musical chairs: CVC weighed deal for Golub

In the immediate aftermath of BlackRock’s mammoth $12bn takeover of private credit manager HPS Investment Partners last year, there was one question on everyone’s lips: what next for Golub Capital and Sixth Street?

Golub and Sixth Street are of course two of the remaining independent large-scale players in private credit, with enough heft to immediately move the needle for an asset manager trying to break into the space.

Golub, it turns out, has been at the centre of some discussions. CVC explored a deal for the $75bn private credit manager in recent months, several people briefed on the matter told the FT.

A merger or takeover of Golub would make CVC a major force in private credit and lift the group’s €200bn in assets under management significantly, putting it ahead of TPG.

It would also round out its business given most giants in the private investment industry are becoming proverbial financial supermarkets. No longer do they just pitch private equity funds alone.

It’s unclear if Golub and CVC will do a deal, and one person close to the matter cautioned Golub was not entertaining a sale. The two groups declined to comment.

CVC has been targeting a private credit firm in the US for more than a year as it seeks a stronger American foothold after several underperforming private equity deals.

Top executives at the firm have previously held talks with HPS and Mubadala-backed Fortress Investment Group.

HPS ultimately sought out a sale to the world’s largest asset manager — BlackRock — while talks between CVC and Fortress ultimately died, people familiar with the matter said.

The talks themselves underscore the shifts under way in the private investment industry as listed groups including CVC look to bulk up and diversify their businesses.

People tell DD almost every private credit investment manager is exploring its options, particularly after recent deals have turned investors from billionaires on paper to full-fledged magnates. 

Silver Lake strikes in a market crisis

Silver Lake has now struck two megadeals during the big market meltdowns of the past few years.

On Monday, the technology focused private equity titan unveiled a deal to carve out programmable chipmaker Altera from Intel at a $8.75bn valuation.

In the deal, Silver Lake will take a controlling 51 per cent stake in Altera while Intel is betting the group can lead an operational turnaround that will boost the value of the 49 per cent stake it is retaining.

Ken Hao, Silver Lake’s chair, negotiated the final stages of the deal as global financial markets went into freefall due to a trade war launched by Donald Trump that threatens to roil semiconductor markets. 

It’s similar timing to the firm’s $12.5bn carve-out of Qualtrics from German IT conglomerate SAP on the weekend in March 2023 when Silicon Valley Bank collapsed. 

Hao moved forward believing the deal offered a rare chance for Silver Lake to seed a sizeable bet in a semiconductor industry that has grown so large in size it’s out of the reach of PE buyers.

The bet, like its virtually debt-free takeover of Qualtrics, comes with modest leverage. It’ll be financed with about $3.5bn of equity and $2bn of bank debt.

While Silver Lake is no semiconductor tourist, such companies are an “extreme sport” for PE firms due to their complexity and cyclicality. 

The buyout of NXP Semiconductor, a prior KKR and Silver Lake deal, is legendary on Wall Street for its near-collapse during the 2008 crisis. But both made money on the deal and in time NXP has become a giant.

Silver Lake fared better in its creation of Avago, the predecessor to what is now Broadcom, where Hao installed its famously aggressive and successful chief Hock Tan.

Monday’s deal comes with uncertainties. But Silver Lake is betting Trump’s trade war ultimately proves manageable for semiconductors and that gaining exposure to AI technologies is worth the risk.

Job moves

CVC has hired John Kelleher as a managing partner in New York. He was most recently senior partner and interim chief executive at McKinsey’s special operations unit. 

ING has named Enrique Piñel as managing director and global head of financial institutions advisory based in the UK. He previously worked at Barclays and JPMorgan Chase.

KKR has named retired US general David Petraeus as chair of its expanding Middle East business as money managers pile into the oil-rich region to bet on its growing economies and be closer to its sovereign wealth funds.

Meta has named Dina Powell McCormick, Trump’s former deputy national security adviser, and Patrick Collison, the chief executive of Stripe, to its board of directors.

Deutsche Bank was set to hire Barclays’ global co-head of equity capital markets Tom Swerling, a person familiar with the matter tells DD. Meanwhile, Barclays has hired John Kolz as global co-head of ECM from RBC Capital Markets.

Smart reads

Security implications The British Steel crisis is spurring greater scrutiny of Chinese investment in the UK’s critical national infrastructure and supply chains, the FT writes. 

Debt crisis A rise in unsecured credit among India’s middle-class is threatening the country’s economic ambitions, the FT reports. 

Beyond BP The oil major’s former chief executive John Browne reflects on the renewables backlash in an interview with the FT as he prepares to stand election as Cambridge university chancellor.

News round-up

Goldman Sachs chief hopeful Trump will listen to corporate America (FT)

UAE’s Sidara bids £242mn for Wood Group after offering £1.5bn last year (FT)

LVMH sales fall sharply in warning sign for the luxury industry (FT)

Former BGC employee faces prison after breaching asset freeze order (FT)

Donald Trump signals further tariff relief for US carmakers (FT)

UK lenders fret over risk-transfer market after BoE warning (FT)

RSA brand to disappear from UK insurance sector (FT)

Topgolf founders tap investors for high-tech version of game of pool (FT)