ICG backs spin-out of Standard Chartered Private Equity

Tim Burroughs, AVCJ
18 December 2018

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Intermediate Capital Group (ICG) has agreed to support a spin-out of Standard Chartered’s private equity business, taking the majority of the remaining $1bn in assets off the bank’s balance sheet.

The Standard Chartered Private Equity (SCPE) team, led by Nainesh Jaisingh, are the owners and operators of a newly formed PE firm – called Affirma Capital – that will continue to manage the portfolio as well as around $2bn in assets that were spun out through five secondary transactions between 2013 and 2015. In addition, they will have $400m for new deals and follow-on investments.

The deal is backed by ICG Strategic Equity, which specialises in GP-led fund restructurings, recapitalisations, and whole-fund liquidity solutions. This is ICG Strategic Equity's first investment outside of North America and Europe.

The SCPE portfolio comprises holdings in 35 companies across South-east Asia, India, China, South Korea, the Middle East and Africa. Affirma's overall $3.6bn under management includes investments managed for third parties – for example, it has separate account mandates in Korea – as well as the assets from the earlier secondary transactions, the portfolio being acquired by ICG, and the new capital.

SCPE relaunched the spin-out last year, having failed to get traction with the initiative in 2016. The plan was to create a new platform backed by financial sponsors or a merger with an asset manager that wants to expand into private equity. This was consistent with Standard Chartered's objective to exit the principal investment business.

The bank decided it could no longer support a principal investment business off its balance sheet around 2012. Rather than a complete spin-out, it opted for the five secondary transactions. A string of third-party investors, including Coller Capital and Goldman Sachs, contributed capital, with the SCPE team taking a minority interest in each of the four new limited partnerships created.

Standard Chartered's plans then changed and talks began with the investment team over a spin-out. They failed to reach an agreement and Joe Stevens, SCPE's CEO who was leading negotiations on the spin-out, was dismissed in November 2016. This not only upset the secondary investors, but it also triggered key-person events in the partnerships they had backed.

SCPE spent 12 months reestablishing transparency and credibility with the LPs, stabilising the portfolio, and reducing the team's cost base in anticipation of revisiting the spin-out option. Exits and legacy clean-up work shrank the portfolio from $1.6bn to around $1bn, while Actis acquired the SCPE real estate business in Asia.

"We are excited to acquire this high-quality, diversified portfolio of private equity assets in partnership with Affirma Capital. The team of 55 investment professionals, led by Nainesh Jaisingh, has a strong track record, extensive experience and deep, local networks in the regions we are investing in," Ricardo Lombardi, managing director of ICG Strategic Equity, said in a statement.