GP staking is an umbrella term – here are the shades of grey. 🌳 GP staking Investments made by the likes of Blue Owl Capital, Petershill, Blackstone into the largest asset managers are fundamentally the acquisition of a stream of cash flows. The ability to buy well is driven primarily by the value at which the staker acquires those cash flows – enterprise value growth will be a factor, but the ability of a $30-40B AUM firm to double or triple its AUM is difficult to underwrite and for external investors, hard to directly influence. It is less common for such stakes to include material commitments to underlying funds. 🌳 GP growth equity Investors such as Bonaccord Capital Partners and Hunter Point Capital LP take growth equity stakes, still minority equity, into managers with $1-10B of AUM are seeking to value the potential for an existing stream of cash flows to the management company to grow over time, through a combination of carried interest, but also the growth of AUM and related management fees. Investments will often take the form of management company and fund-level commitments. Target managers benefit from capital invested into the management company to launch new strategies, as well as fund-level capital to turbo-charge an upcoming fundraise process. It is important that investors can support managers with a combination of capital, but also distribution support, as many firms of this scale will be growing IR and capital raising functions, and will benefit from the network of the investing firm. 🌳 GP seeding Ternion has seen a significant growth in GP seed constructs. Capital can be invested across both equity and debt, usually with large amounts of structure. The most significant driver of returns for seed investments are carried interest share and enterprise value growth of any equity invested in the target firm. The ability for a newly seeded firm to double or triple AUM may only be 2-3 direct deals away, but the investing firm will not benefit from a stream of cash flows on day 1 – just the potential to share in the upside from future investments and management fees. Market participants include GP House, Grafine Partners. #gpstaking #gpseeding #privatemarkets #privateequity #alternatives #emergingmanagers GP Stakes News GP Staker British Emerging Manager Institute (BEMI)
Great insight Ed.
Great way to break it up Ed. GP Growth Equity and GP Seeding can be very different as you have summarised when compared to the 'mega' stake deals. In Asia (primarily Aus/Sing) we see 90%+ of our deal flow in GP Growth Equity #ScarcityPartners
Very true!
Regional Sales Director @ Apex Group Ltd | EMEA Sales and Business Development
2wTks for sharing Ed. Very helpful.