PE HUB Wire Highlights, 9.12.18


Private Equity Editor Chris Witkowsky reflects at home. Photo by Wendy Witkowsky

Big money managers build in-house PE, San Jose pension eyes program to tap early stage innovation

Happy Wednesday!

This is Chris, in for Luisa, who is heading to an event this morning. What’s been going on this week?

Building PE: One of the big stories this week was an announcement that Franklin Templeton and fund-of-funds Asia Alternatives are forming a partnership that will give Franklin clients access to global investments. Franklin Templeton will be majority owner. Arthur Wang, former managing director of private markets at San Francisco Employees’ Retirement System, will lead the new entity, called Franklin Templeton Private Equity.

Franklin Templeton sees “tremendous opportunity for growth in the alternatives and private equity space as investors look to add alpha and increase diversification in their portfolios,” according to a statement earlier this week.

A limited partner I spoke to said this type of activity, larger money managers building in-house private equity talent, is a big movement in the industry. These large firms, with billions under management, want the ability to offer their clients access to private equity, and one way to do that is partner with large funds-of-funds. For the PE firms involved, this type of partnership probably comes as a relief in that it eases some of the pressure to constantly be in fundraising mode.

“Alternatives in general is an area where a lot of huge money managers realize they can’t build themselves,” my source said. And they need to be in [alternatives] obviously. … A compelling feature of private equity for huge money managers is that there are so few periods where you can point to public equities as being a better play than private equity, and their clients are realizing this and they need an answer for them.

“Even if you have $600 billion under management in fixed income, emerging markets, small cap, mid-cap, none of those sub-equity asset classes have matched private equity,” my source said.

How much of this activity have you seen and which firms are involved? Hit me up at [email protected].

Capital city: Here’s an interesting thought: San Jose is the capital city of Silicon Valley and should be tapped into the robust seeding and startup activity that goes on all around it. The city’s $3.7 billion police and fire pension hired Stanford Professor Ashby Monk to help it design a program that focuses on startups in San Jose, to fulfill a recently approved 4 percent allocation to VC. This is separate from the pension’s 8 percent target allocation to private equity, which is managed through a partnership with Neuberger Berman.

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