Feb 23, 2021
Scott Stringer eyes looser pension rules for private equity
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New York City Comptroller Scott Stringer is looking to loosen strict rules that govern private-equity firms managing the city’s pensions — a potentially risky policy switch that he claims will improve returns, The Post has learned.
Specifically, Stringer — a Democrat running for mayor in this year’s election — is urging trustees of the city’s pensions to lift a blanket rule on Wednesday that has required private-equity firms to pay their own bills if they get into scrapes with regulators or end up in litigation with investors, according to a memo obtained by The Post.
Lifting the rule — which was imposed in 2016 as a precaution after a slew of big buyout firms including Carlyle Group, Blackstone Group, KKR and TPG were forced to pay out nearly $600 million to settle a civil collusion case — could potentially saddle taxpayers with millions of dollars in liabilities.
Indeed, city officials imposed the so-called “GP Expenses Provision” after Carlyle Group, headed by billionaire David Rubenstein, stuck its own investors with more $100 million in payouts related to the collusion case in 2015, sources said.
Despite such concerns, Stringer argues that the rule has lately deprived the city’s pensions for employees, teachers, police and firefighters of promising deals with top-performing buyout firms. Last year, three such deals worth a total of $843 million fizzled because of the rule, according to the memo from Deputy Comptroller Alex Done.
Silver Lake Partners, a Silicon Valley-based fund, scrapped talks with the city last June to manage $313 million for New York City because of the rule, he said. A month later, Nordic Capital and a co-investor skipped out of a $280 million deal. And in September, talks fell through with Chicago-based Thoma Bravo to manage $250 million for city workers, according to the memo.
Silver Lake, Thoma Bravo and Nordic Capital all declined to comment.
“Each of these managers has delivered first-quartile historical track records” and all of the funds were oversubscribed at the time, Done wrote. “These missed opportunities (and any future missed opportunities) of high-performing, in-demand managers have the potential to negatively impact [city pensions’] ability to maximize risk-adjusted returns.”
He added that the city would keep restrictions in place in cases where a buyout firm’s “past behavior” suggests that taking on its legal risks wouldn’t be a good idea.
In the case of Silver Lake, the fund has been snagged with multiple suits over alleged improper behavior. In 2014, Silver Lake agreed to pay $29.5 million for its role in the civil collusion suit that prompted New York’s 2016 clampdown. Now, Silver Lake is being sued by investors in satellite operator Intelsat over alleged insider trading. Silver Lake has denied the allegations.Stringer argues that the rule has lately deprived the city’s pensions for employees, teachers, police and firefighters of promising deals with top-performing buyout firms.LightRocket via Getty Images
“We are currently the only pension system with this uniquely stringent requirement and the trustees are engaged in a discussion about impacts to competitiveness,” a spokeswoman for Stringer said in a statement on Tuesday. “As a fiduciary, the Comptroller believes in holding private-equity funds accountable for their own wrong-doing and is working with the trustees to ensure we maintain the best possible investments for the funds.”
New York City’s pensions representing 584,000 members have a total of $12.8 billion invested in private equity, according to a July report by private-equity lobbying group, the American Investment Council. That makes it the eighth-biggest investor in private-equity funds among public pensions, the report said.
Nevertheless, the city’s pensions only managed to allocate 6.8 percent of their assets to private equity as of last June, missing a target of 8 percent, according to a 2020 financial report by the city. That’s despite the fact that the city expects PE’s yearly rate of return will be 11.2 percent, dwarfing that of stocks or bonds, according to the report.
Now, the city is looking to raise this year’s allocation of funds to private equity by 40 percent to $5 billion, and Stringer frets that competition to invest with top private-equity managers is growing.
“With zero or negative interest rates across much of the world right now, more money is expected to flow into private markets and amplify the competition for allocations to strong managers,” according to the memo.
There may be a way for New York City, however, to reach that target without caving to pressure from the buyout firms, said Jordan Thomas, a partner at law firm Labaton Sucharow who is a former assistant chief legal counsel for the Securities and Exchange Commission’s division of enforcement.
“If I were New York City and I really cared about this, I would go to CalPERS and join together,” Thomas said, referring to the California Public Employees Retirement System, the nation’s biggest pension fund. “I think this is eminently doable but they need some backup.”
“I think what New York City asked for is not crazy,” Thomas said of the GP Expenses Provision. “The most baffling thing about security laws is you can do bad things if your investors agree to it.”
News Source: newsbrig.com
Startup behind Oxford COVID vaccine reportedly eyes IPO
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A startup that played a crucial role in developing Oxford University’s coronavirus vaccine is hatching plans to go public — but the centuries-old school may be standing in the way, a new report says.
The startup, Vaccitech, was founded in 2016 by two Oxford scientists who created the immunization technology powering the COVID-19 shot that the university licensed to AstraZeneca, according to The Wall Street Journal.
The firm has been courting investors for an initial public offering valuing it at about $700 million, a price tag that could potentially grow to $1 billion by the end of the year, the paper reported Sunday.
But Oxford — which owns about 10 percent of Vaccitech — has reportedly put up several hurdles in the company’s road to an IPO.
For one, Vaccitech has not been able to get its hands on Oxford’s contract with AstraZeneca, which agreed to exclusively produce and distribute the COVID-19 vaccine, the Journal says.
The contract contains legal and financial details that are key to fairly valuing Vaccitech, which was shut out of Oxford’s negotiations with AstraZeneca, according to the paper.
Vaccitech has also reportedly battled the school over how to describe the company’s role in the shot’s development. The company is seeking approval from the university to tout Vaccitech’s work with Oxford scientists in the vaccine’s creation, along with its efforts to support early clinical trials and provide safety data to regulators, the Journal says.Oxford University — which owns about 10 percent of Vaccitech — has reportedly put up several hurdles in the company’s road to an IPO.Getty Images
There was even a brief squabble over where Vaccitech should list its stock — the company has pushed for the US’ Nasdaq exchange, but Oxford-linked investors wanted a London listing, according to the report.
Vaccitech and AstraZeneca both declined to comment to the Journal, while Oxford didn’t respond to the paper’s requests for comment.
Vaccitech is one of more than 200 startups that Oxford has supported since the late 1980s, according to the WSJ. Going public would reportedly allow it to cash in on its success with a COVID-19 vaccine like other biotech firms, including Novavax and Curevac.
Vaccitech owns rights to the so-called viral vector technology that makes the Oxford/AstraZeneca vaccine work, the Journal reported. The shot uses a deactivated cold virus from a chimpanzee to provoke an immune response to COVID-19 in the body.Filed under biotech , COVID vaccine , Oxford University , pharmaceuticals , startups , 3/8/21