Petershill IV closes on USD 5bn

The fund closed above its original target, which was around USD 3.5bn-4bn. It held a first close in February 2020 and has made eight deals to date.

The vehicle will follow the strategy of its predecessor, generally taking minority stakes in the management companies of private equity firms.

Ali Raissi, managing director and co-head of Petershill at Goldman Sachs Asset Management, told Unquote that much of the fundraising was done virtually, although this did not hamper the process. "We expanded our institutional client base quite materially, so we had a lot of new meetings," he said. "We are in a privileged position at Goldman in that we have existing relationships and we are on our fourth fund – I can imagine it would have been much harder as a newer fund."

The fund's predecessor vehicle held a final close in February 2018 on USD 2.5bn, surpassing its initial USD 2bn target, as reported. Petershill IV is therefore twice the size of its predecessor, which Raissi put down in part to the continued development of the global private equity market and the opportunity that this presents. He cited data from Preqin and McKinsey's data showing that the fund is investing in a USD 10trn private equity market, expected to grow to USD 17trn. "A lot of GP capital needs to be committed for setting these funds up and running teams," he said. "This has historically been self-financed, but the growth of the industry and demand for capital has created great opportunities to partner with high-quality firms."

The macroeconomic context is also an important factor in the opportunities that Petershill and Goldman see, Raissi said. "There is a lot of capital going into private capital markets, but it is extending its duration, be it through GP-led secondaries or continuation vehicles, and longer-duration funds. These themes all benefit the firms we buy interests in. There is also growth in the industry as a whole – it used to be that at a USD 1bn valuation, a company had to go public to seek financing, but we have more and more unicorns that are being held privately for longer. The growth of retail investing also benefits our firm and the managers we invest in."

Due diligence is key to selecting the firms that the fund will invest in, Raissi told Unquote. "We want to partner for the right reasons with the firms we believe have their best days ahead of them. Questions we might ask include: is there good alignment?; Will this improve the firm?; Will the underlying clients benefit?; Does it create longevity?; Can we add value and do our investors benefit? So we do a lot of due diligence on management companies to understand how good their products are, their prospects, their team today, and what it will look like over time."

To date, Petershill has partnered with firms including Accel-KKR, General Catalyst, Harvest Partners, Montagu Private Equity and Permira, according to a statement.

Petershill was founded in 2007. It floated on the London Stock Exchange in September 2021 selling GBP 1.2bn in stock in its listing with a GBP 4bn market capitalisation. Petershill IV will invest alongside the listed entity, using primary capital raised as part of the IPO.

Investors
The fund is backed by institutional investors such as public and private pensions plans, insurance companies, family offices and sovereign wealth funds. "Our programme has historically been more of an institutional club, but we have expanded our group of LPs to more than 50," Raissi said. "Today we have a predominately institutional investor base, but we also have private wealth – an area that is increasingly of interest to private capital firms."

The size of the LP base is a significant increase from that of Petershill III, where capital was provided by a group of 14 LPs.

Investments
The vehicle will continue the strategy of its predecessors, aiming to offer capital to GPs by making long-term minority investments in the management companies of private equity firms.

The strategy has mainly made equity investments to date, Raissi said, noting that this is a reflection of what the GP's partner firms are looking for. "We have looked at other capital solutions if that's what partner firms need," he said. "We would never say that this will always be the case though, as we have evolved our business to the needs of GPs over the years and we are always responsive. This is an interesting opportunity, though, as it is an industry where the traditional sources of private capital to other industries are sometimes viewed by GPs as being competitors."

The fund invests in GPs that manage a range of strategies, Raissi told Unquote. "The prospects of the strategy are always important, we think about what will happen in that space in the medium term. We have done deals in venture, PE buyout, minority investing and growth, as well as infrastructure and real assets. We even have a secondaries stake."

Although the Petershill strategy makes long-term investments, it has made some realisations to date, Raissi told Unquote. "We are on our fourth vintage, so we have already had one or two realisations. We realised our first fund via a handful of different sale processes, and Funds II and III have contributed a large slice of their assets into a public company, which creates liquidity over the long term. It is a mechanism where a liquidity event does not reduce the strategic link between Petershill and Goldman Sachs, and all our investments have long-term prospects."

People
Goldman Sachs Asset Management – Ali Raissi (managing director, co-head of Petershill).

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