Private Equity Firms Navigate Geopolitical Shifts: Ardian’s Insights and CalPERS’ PE success
The world of private equity is currently being shaped by geopolitical uncertainty, influencing investment strategies and geographic preferences.Ardian, a major player in the alternative investment arena, is closely watching these trends, while the California Public Employees’ Retirement System (CalPERS) is reaping rewards from its revamped private equity approach.
ardian Adapts to Global Uncertainty
Ardian’s leadership, including Founder And Chief Executive Dominique Senequier, has noted how a weaker dollar, influenced by global instability, could impact their business, as they hold meaningful dollar revenues against Euro-denominated expenses. “A stronger dollar benefits us,” Senequier stated in their annual report. The dollar has already depreciated more than 9% against the Euro since the beginning of the year.
Adding to the complexity,Ardian’s Asian investors are expressing apprehension about the U.S.market due to tariff increases, leading them to consider increased investments in Europe.Senequier believes this shift will considerably boost investment in European defense, sparking growth in the region over the next few years. This sentiment is echoed by Executive President mark Benedetti,who highlighted Europe’s appeal as a stable and diverse economic surroundings.
In May 2024, a report by Preqin indicated that European private equity fundraising had increased by 15% year-on-year, driven by investor demand for less volatile markets.
Key Highlights From Ardian’s Report
- Ardian distributed $13 billion to investors and raised $20 billion in the past year.
- European investors constitute 49% of Ardian’s investor base, followed by the Americas (21%), Asia-Oceania (17%), and the Middle East (13%).
- The firm’s secondaries & primaries business deployed $13 billion last year, with $10.1 billion invested across 19 secondaries deals.
- Ardian’s total AUM, including advised capital, amounts to $177 billion, with secondaries and primaries comprising $97 billion.
CalPERS’ Private Equity Program Shows Strong Performance
After two years under its revised private equity strategy, CalPERS is witnessing tangible positive outcomes. Their PE program has outperformed the State Street PE Index over both one-year and three-year periods, reporting returns of 12.2% versus 7.1% and 6.6% versus 3.1%, respectively. These figures were presented at their investment committee meeting this month.
CalPERS’ PE program has achieved an annualized internal rate of return (IRR) of 11.9%, positioning it as the top-performing program among the 30 largest U.S. public PE programs by net asset value (NAV) for calendar year 2024. Furthermore,the current strategy boasts an annualized TVPI (Total Value to Paid-In Capital) significantly higher than the pre-2023 strategy (1.25 vs 1.10).
The enhanced performance stems from strategic shifts initiated in the fourth quarter of 2022, including diversifying beyond large buyouts, refining manager selection, increasing co-investments, improving co-investment selection, and actively participating in the secondaries market.
anton Orlich, Head Of PE at CalPERS, emphasized the importance of investments beyond customary commingled funds to achieve higher net returns by cutting costs and mitigating the J-curve effect. This approach accelerates the impact of investment decisions on the portfolio, a strategy that has benefited CalPERS in recent years.
CalPERS allocates 17% of its total AUM to private equity, amounting to approximately $85 billion, according to PEI data. A board meeting is scheduled for next week to further discuss these developments.
Essentials: Impilo Closes Debut Fund
Nordic healthcare specialist Impilo has successfully concluded fundraising for its first closed-end fund, reaching its €700 million hard-cap in just seven months. Impilo fund II, launched in September with a €600 million target, marks the firm’s inaugural commingled fund, building upon its previous evergreen vehicle established in 2017. Evercore served as the advisor for this fundraise.
Fund II will mirror its predecessor’s strategy, focusing on lower-mid-market healthcare businesses across pharmaceuticals, medtech, specialist pharma services, and related industries in the Nordic region. Impilo’s evergreen fund delivered realized returns exceeding the marketed 3x target threshold.
Previously, Impilo executed a continuation fund process on its portfolio company Immedica Pharma, valued at €320 million, with Morgan Stanley Private Equity Secondaries and Hayfin as lead investors. Impilo was founded in 2017 by former Altor Equity partners executives Jesper Eliasson, Fredrik Stromholm, and Magnus Edlund.
LP Meetings This Week
Keep an eye on these LP meetings this week:
| Date | Details |
|---|---|
| June 9 | |
| June 10 | |
| June 11 | |
| June 12 | |
| june 13 |
understanding Private Equity Performance Metrics
when evaluating private equity fund performance, several key metrics come into play. Here’s a quick guide:
- Internal Rate Of Return (IRR): This is the annualized effective compounded rate of return. A higher IRR generally indicates a more successful investment.
- Total Value To Paid-In Capital (TVPI): This ratio measures the total value of distributions and remaining value of a fund, divided by the capital invested. A TVPI greater than 1.0x indicates that the fund has returned more than the initial investment.
- Distribution To Paid-In Capital (DPI): This ratio focuses on realized returns, measuring the cumulative distributions paid to investors divided by the capital invested.
Pro Tip: Always consider these metrics in conjunction with each other and benchmark them against similar funds of comparable vintage years to get a thorough view of performance.
Frequently Asked Questions About Private Equity
- What factors are currently influencing the private equity market? geopolitical uncertainty, interest rate fluctuations, and evolving investor preferences.
- How is Ardian adapting to global economic shifts? By closely monitoring currency fluctuations and investor sentiment, capitalizing on European opportunities.
- What strategic changes contributed to CalPERS’ improved private equity performance? Diversification, refined manager selection, increased co-investments, and active participation in the secondaries market.
- What is a commingled fund in private equity? A fund pooling capital from multiple investors for diversified investments.
- Why are secondary investments becoming more popular in private equity? They provide liquidity and portfolio adjustment opportunities.
What are your thoughts on the shift in investor focus towards Europe? How do you see geopolitical factors impacting private equity investments in the next year?
