ResearchThree Things (4/15)

Three Things (4/15)

Apr 15, 2024

CVC going public

Global buyout firm CVC Capital Partners is set to kick off a planned IPO in Amsterdam on Monday. CVC is looking for a valuation of about €13 billion to €15 billion, people familiar with the matter said, or the equivalent of $13.8 billion to $16 billion. CVC oversees about €186 billion, or about $198 billion, in investments, spanning private equity, credit and infrastructure and has forged a particularly high profile in sports-related deals highlighted by its sale of Formula 1 in 2016.

Public investors value listed PE firms on their ability to grow assets, because of the steady and growing fees this business generates. Performance income, from selling investments at a profit, is another source of earnings, but is less highly valued by the market because it is more volatile. CVC has already bought smaller peers to boost fee-generating assets and an IPO will likely allow the company to lean into that thesis moving forward.

Franklin Templeton’s pivot

Franklin Templeton, long known as a big investor in stocks and bonds, has quietly become a major force in private markets. Grappling with a steady stream of outflows from its legacy mutual-fund business, the company has pivoted towards the private markets and is succeeding: it has acquired private-credit, private real estate and private equity managers over the last several years. Franklin isn’t alone among traditional asset managers in using dealmaking to push into private markets – T. Rowe Price purchased private credit firm Oak Hill in 2021 and Blackrock recently purchased infrastructure giant Global Infrastructure Partners.

Traditional asset managers such as Franklin have long coveted private equity’s rapid growth and rich fee streams, but until recently, private-markets firms had little reason to sell to a firm like Franklin Templeton. Slowing inflows from institutions have pushed private-markets firms to tap individual investors, a game that traditional asset managers know well. Combining investment expertise, distribution, and a long-tail commitment to education may create the perfect storm for these firms to access the next frontier.

Treasury weakness

A series of weak auctions for U.S. Treasuries are stoking concerns that markets will struggle to absorb an incoming rush of government debt. A selloff sparked by a hotter-than-expected inflation report intensified this past week after lackluster demand for a $39 billion sale of 10-year Treasuries. Issuance of Treasuries has exploded since the pandemic began: in the first three months of 2024, the U.S. sold $7.2 trillion of debt, the largest quarterly total on record. The government is poised to sell another $386 billion or so of bonds in May – a pace that Wall Street expects to continue no matter who wins the election in November.

Given that people and companies are likely pulling out money to pay taxes, the liquidity crunch doesn’t come as a total surprise – it’s a bit of an air pocket as folks manage outflows around tax time. The Fed looking towards quantitative tightening, per their March minutes, also gives signs of hope. The trend is worrisome and certainly something to monitor but the Fed and government officials have plenty of tools at their disposal to ensure that liquidity and demand stay high.


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