Skip to main content
- Funds
Singapore, Institutional
Change
The views expressed are those of the author at the time of writing. Other teams may hold different views and make different investment decisions. The value of your investment may become worth more or less than at the time of original investment. While any third-party data used is considered reliable, its accuracy is not guaranteed. For professional, institutional, or accredited investors only. All investing involves risk. Please refer to risks at the end.
In this edition of Wellington’s Private Investing Quarterly Update, we look back on 2022, share updates and outlooks for each strategy, explore ESG and impact highlights, and profile key news and events.
Introduction
Lookback on our business throughout 2022:
- Since inception, we have grown our Private Equity platform to four fund families, which currently totals over US$7 billion raised, half of which was raised over the last year.
- Amid an increasingly complex market with lower deal activity and reduced valuations, we endeavored to continue delivering strong results for our clients and strove for investment excellence.
- In 2022, we raised over US$3 billion globally, onboarded more than 600 LPs, and hosted 13 closes across four strategies (excluding coinvest).
- Expanded our private investing business into private placement debt, with the appointment of Emeka Onukwugha, CFA, head of Private Placements, and Elisabeth Perenick, FSA, CFA, head of Portfolio Management.
- Continued to increase ESG engagement across the platform, providing portfolio companies with proprietary insights and actionable guidance.
- Increased diversity across the teams, investing in more than 40 talented new hires across the business who bring new skills, backgrounds, and perspectives.
Why it matters
We have grown our private investing business over the last decade, bringing diverse expertise across sectors and stages. Many of our core strengths as a firm — deep sector and global research, a robust ESG and sustainability platform, embedded investment science capabilities, and an extensive network of relationships within the investment industry — extend into our private investing business and help to set our platform apart. As we look to the future, we are dedicated to building an elite private investing platform, offering a diverse set of investment solutions, and remaining exclusively focused on delivering strong outcomes for our clients.
Investment strategy updates
Diversified late-stage growth: Focused on private late-stage companies within consumer, technology, health care, and financial services sectors seeking capital and expertise to accelerate growth prior to potential IPO or sale.
- The strategy’s more recent investment was in Dataiku, a data science and machine-learning platform for the design, deployment, and management of AI applications.
- The paralysis that gripped the late-stage private market in the second quarter largely remains but is showing signs of easing. Across the board, deal activity levels remained low and valuations were largely either flat or down.
Late-stage biotechnology: Focused on private biotechnology companies one to four years away from a potential liquidity event that are concentrated on drug development and enabling technologies.
- The strategy’s more recent investment was in Apogee Therapeutics, a biotechnology company focused on engineering therapies for atopic dermatitis.
- In the current market environment, companies are pulling different levers to adjust to the higher cost of capital. Most are working to extend cash runways by refocusing the pipelines and cutting costs where possible, including restructurings/layoffs.
Multi-stage climate: Focused on private companies developing products or solutions that help to mitigate and/or adapt to climate change.
- The strategy’s more recent deal was an investment in Span IO. Span is a developer of a connected software-enabled home electrical panel and other smart paired devices, such as an EV charger, that support the general trend of electrification.
- While much of the venture market eased in 2022 compared to 2021, the climate-tech market remained resilient. Most of the strength can be credited to country-level carbon reduction pledges driving climate-related policy and regulation, and corporate promises providing new markets for climate technologies.
Early-stage diverse venture: Focused on investing in the next generation of diverse leaders, predominantly from the Black community.
- The strategy’s more recent investment was in Flavrs, a shoppable video application that combines premium food content and commerce.
- Deal-flow and valuation expectations at the Series A stage have started to return to normal. In our view, 2023 will present a growing number of diverse-founder-led companies seeking capital at more attractive valuations than in recent years.
Private credit: Focused on investing in investment-grade private debt issuance from both public and private issuers.
- We are pleased to share that two experienced private credit investors (Emeka Onukwugha, CFA and Elisabeth Perenick, FSA, CFA) have joined Wellington to lead our new private placement debt capability.
- In the current market environment, the historical downside-mitigation characteristics of private placements could be valuable as the public market faces continued volatility. Rising rates also create an environment where investors have the potential to capture higher yields and incremental spread versus public fixed income alternatives.
Fintech: Long/short hybrid strategy focused on mid- to late-stage private growth companies with an opportunistic financial services/fintech strategy.
- The strategy remains active in the private market, with a focus on companies with balance-sheet resiliency, strong unit economics, and pricing power. We are particularly excited about opportunities in the B2B payments area, where we made a 2022 investment in Xepelin, an automated financial services platform serving middle-market companies in Chile and Mexico.
- We believe today’s macro backdrop, coupled with the persistent disruption of financial services by innovative technologies, creates a highly attractive environment for long/short public and private investing, especially as the recent market dislocation may create attractive entry points.
ESG and impact highlights
ESG:
- The Private ESG Team’s mission is to integrate ESG research and analysis to minimize investment risk and maximize portfolio company value.
- In 4Q22, the team published ESG in private markets: Insights for 2023 and Human capital management for private companies, which can both be found on our Private Investments ESG landing page.
Impact:
- The Impact Measurement and Management Practice works closely with the private climate team to provide robust evidence of the positive climate impact of portfolio companies.
- In 2022, impact diligence was completed on Meati and AMP Robotics — linking their products and services to GHG emissions avoidance. The team also published an article on how to effectively measure impact in venture capital.
Insights, news, team, and events
New Insights:
Michael Carmen, CFA, Co-Head, Private Investments
Michael Carmen, CFA, Co-Head, Private Investments
Elisabeth Perenick, CFA, Head of Portfolio Management, Private Placements
Emeka Onukwugha, CFA, Head of Private Placements
Hillary Flynn, Director, ESG, Private Investments
Drew Morales, Associate Director, ESG, Private Investments
Otua Sobukwe, Research Associate
Team:
- Emeka Onukwugha, CFA, head of Private Placements, and Elisabeth Perenick, FSA, CFA, head of Portfolio Management in Private Placements. They have worked together for the past 20 years and bring deep insurance expertise to their work in private debt to lead our private placement debt capability.
- Osman Nur, Caitlin Ferris, Owen Sirianni, Jenny Xie, and Rostislav (Ross) Castillo have joined as venture associates. Osman will assist the late-stage growth investment team with sourcing, diligence, and management of portfolio companies. Caitlin, Owen, and Jenny will help source and diligence late-stage venture and early-growth-stage companies that develop solutions that help to mitigate and/or adapt to climate change. Ross will help source and diligence the firm’s private company investment activity in early- to late-stage life science companies.
- Courtney Hugger has joined as an ESG associate. Courtney will work with the Private Investing ESG Team to help execute our private investment ESG strategy alongside the deal teams as they evaluate private company investments.
Investment risks
Major risks
Market risks
- Directional; not market neutral.
- Primarily invest in equity.
- Will experience equity-like volatility, at times.
- At times, markets experience great volatility and unpredictability.
Broad investment flexibility
- No benchmark orientation; few investment restrictions.
- Geographic, sector, market cap and asset class emphasis may shift over time.
Liquidity risk
- Portfolio of illiquid/private companies.
- The return of invested capital to limited partners may be dependent on the success of the companies held in the portfolio and the timing of such liquidity is uncertain.
Sector risk
- May concentrate by sector; potential for lack of diversification.
Country/currency risk
- May concentrate by country.
Transparency risk
- Holdings, pricing, and other data may be limited and, thus less transparent than certain other investments.
Regulatory risk
- Not subject to the same regulatory requirements as mutual funds or many other pooled investments.
Concentration risk
- In general, investing in strategies with concentrated exposures to (i) a particular asset class or classes and/or (ii) a particular sector and/or (iii) one or a select few markets involves greater risk than investing in strategies that have greater diversification.
Risk of underlying assets
- In general, each strategy will be subject to the same risk factors as those relating to the underlying securities or assets held in its portfolio.
Early-stage diverse venture risks
Extended term and liquidation
- The total hold period for an investment in the strategy will be much longer than compared to other investment products. The strategy’s term may extend for 10 years from the final closing date, with the possibility of five or more years of extensions, followed by an indefinite liquidation period. This risk is increased by expected significant follow-on investment activity later in the strategy’s term and investments in underlying funds that will also have indefinite liquidation periods. Costs and expenses incurred by the strategy in connection with an extended term and liquidation period are expected to be significant.
Layered fees
- The strategy has a layered fees and expenses structure that makes total costs and expenses higher relative to other investment products.
Loss of key personnel
- The performance of a strategy is largely dependent on the skill and decisions made by its manager and key personnel, and the loss of any such individual could have a material adverse effect on the performance of the strategy.
Change in investment policy
- The manager of a strategy typically has the authority to alter its investment policy within certain parameters (set out in its constitutional document) by amending the prospectus. This could represent a fairly significant change in the nature and risk profile of the strategy from the one in which you originally invested.
This is a summary of some of the major risks.
Important disclosures
For professional, institutional, or qualified investors only. Past results are not necessarily indicative of future results. There can be no assurance the funds will achieve their investment objectives or avoid significant losses. Any securities mentioned are for illustrative purposes only and are not intended to be an investment recommendation. There can be no guarantee an investment in any portfolio company will be profitable or avoid losses. For a complete list of the private equity strategies’ investments please see https://www.wellington.com/en-us/institutional/capabilities/private-equity.
The private strategies differ in stage, with some making earlier-stage or venture-stage investments whereas others are later-stage strategies. The risks associated with early-stage investing differ from late-stage. Additionally, each strategy considers ESG and sustainability in different ways according to its investment strategy and objectives. Please refer to each strategy’s offering documents for a complete discussion of risks and details regarding investment strategy.
Wellington Management Company LLP (WMC) is an independently owned investment adviser registered with the US Securities and Exchange Commission (SEC). WMC is also registered with the US Commodity Futures Trading Commission (CFTC) as a commodity trading advisor (CTA) and serves as a CTA to certain clients including commodity pools operated by registered commodity pool operators. WMC provides commodity trading advice to all other clients in reliance on exemptions from CTA registration. WMC, along with its affiliates (collectively, Wellington Management), provides investment management and investment advisory services to institutions around the world. Wellington Management Group LLP (WMG), a Massachusetts limited liability partnership, serves as the ultimate parent holding company of the Wellington Management global organization. All of the partners are full-time professional members of Wellington Management. Located in Boston, Massachusetts, Wellington Management also has offices in Chicago, Illinois; Radnor, Pennsylvania; San Francisco, California; Frankfurt; Hong Kong; London; Luxembourg; Madrid; Milan; Shanghai; Singapore; Sydney; Tokyo; Toronto; and Zurich.
This material is prepared for, and authorized for internal use by, designated institutional and professional investors and their consultants or for such other use as may be authorized by Wellington Management. This material and/or its contents are current at the time of writing and may not be reproduced or distributed in whole or in part, for any purpose, without the express written consent of Wellington Management. This material is not intended to constitute investment advice or an offer to sell, or the solicitation of an offer to purchase shares or other securities. Investors should always obtain and read an up-to-date investment services description or prospectus before deciding whether to appoint an investment manager or to invest in a fund. Any views expressed herein are those of the author(s), are based on available information, and are subject to change without notice. Individual portfolio management teams may hold different views and may make different investment decisions for different clients.
In Canada, this material is provided by Wellington Management Canada ULC, a British Columbia unlimited liability company registered in the provinces of Alberta, British Columbia, Manitoba, New Brunswick, Newfoundland and Labrador, Nova Scotia, Ontario, Prince Edward Island, Quebec, and Saskatchewan in the categories of Portfolio Manager and Exempt Market Dealer.
In Europe (excluding the United Kingdom and Switzerland), this material is provided by Wellington Management Europe GmbH (WME) which is authorized and regulated by the German Federal Financial Supervisory Authority (Bundesanstalt für Finanzdienstleistungsaufsicht – BaFin). This material may only be used in countries where WME is duly authorized to operate and is only directed at eligible counterparties or professional clients as defined under the German Securities Trading Act. This material does not constitute investment advice, a solicitation to invest in financial instruments or information recommending or suggesting an investment strategy within the meaning of Section 85 of the German Securities Trading Act (Wertpapierhandelsgesetz).
In the United Kingdom, this material is provided by Wellington Management International Limited (WMIL), a firm authorized and regulated by the Financial Conduct Authority (FCA) in the UK (Reference number: 208573). This material is directed only at eligible counterparties or professional clients as defined under the rules of the FCA.
In Switzerland, this material is provided by Wellington Management Switzerland GmbH, a firm registered at the commercial register of the canton of Zurich with number CH-020.4.050.857-7. This material is directed only at Qualified Investors as defined in the Swiss Collective Investment Schemes Act and its implementing ordinance.
In Hong Kong, this material is provided to you by Wellington Management Hong Kong Limited (WM Hong Kong), a corporation licensed by the Securities and Futures Commission to conduct Type 1 (dealing in securities), Type 2 (dealing in futures contracts), Type 4 (advising on securities), and Type 9 (asset management) regulated activities, on the basis that you are a Professional Investor as defined in the Securities and Futures Ordinance. By accepting this material, you acknowledge and agree that this material is provided for your use only and that you will not distribute or otherwise make this material available to any person. Wellington Private Fund Management (Shanghai) Limited is a wholly-owned entity and subsidiary of WM Hong Kong. Wellington Global Private Fund Management (Shanghai) Limited is a wholly-owned entity and subsidiary of Wellington Private Fund Management (Shanghai) Limited.
In Singapore, this material is provided for your use only by Wellington Management Singapore Pte Ltd (WM Singapore) (Registration Number 201415544E). WM Singapore is regulated by the Monetary Authority of Singapore under a Capital Markets Services Licence to conduct fund management activities and is an exempt financial adviser. By accepting this material, you represent that you are a non-retail investor and that you will not copy, distribute, or otherwise make this material available to any person.
In Australia, Wellington Management Australia Pty Ltd (WM Australia) (ABN 19 167 091 090) has authorized the issue of this material for use solely by wholesale clients (as defined in the Corporations Act 2001). By accepting this material, you acknowledge and agree that this material is provided for your use only and that you will not distribute or otherwise make this material available to any person.
In Japan, Wellington Management Japan Pte Ltd (WM Japan) (Registration Number 199504987R) has been registered as a Financial Instruments Firm with registered number: Director General of Kanto Local Finance Bureau (Kin-Sho) Number 428. WM Japan is a member of the Japan Investment Advisers Association (JIAA), the Investment Trusts Association, Japan (ITA) and the Type II Financial Instruments Firms Association (T2FIFA).
WMIL, WM Hong Kong, WM Japan, and WM Singapore are also registered as investment advisers with the SEC; however, they will comply with the substantive provisions of the US Investment Advisers Act only with respect to their US clients.
@2023 Wellington Management Company LLP. All rights reserved.
Related Insights
Showing
of
Insights Posts
URL References
Related Insights