Actionable Ideas for Companies and Sponsors

Direct Private Investments by Pension Funds and Endowments Continue to Grow

Direct investing by pension funds and endowments, traditionally investing as limited partners (“LPs”), continues to expand. More LPs across the Americas, Europe and Asia have added dedicated teams to pursue direct investment transactions, with larger investors beginning to hire multiple industry-specific deal teams. The longer duration of their investments (typically 5-10 years or more) have largely insulated them from recent market volatility, with no discernable drop off in demand during the fourth quarter. As the LP appetite for direct investing has increased, the structure of these transactions has also expanded to include:

  • Platform Company Investments – Investing $500 million to $1 billion in a blind pool format into a de novo company formed by a proven management team, whose prior track record and identifiable pipeline of opportunities are key criteria evaluated by LP investors. Jefferies recently raised over $900 million in blind pool capital for a de novo data center platform company.
  • Minority Equity Financing – Purchasing a minority stake in an existing operating company with proceeds used to fund growth, provide shareholder liquidity and/or pursue acquisitions. These are often funded by a single LP but can also be structured as a “club deal” for larger minority investments.