Ignacio Jayanti, CEO of Corsair Capital, said the private equity industry has changed in the past 10 years, and he sees some new trends at work in other parts of the private markets, including an increasing institutional investor interest in infrastructure.
As part of a planned expansion, Bahrain-based Investcorp in December bought half of Corsair Capital’s infrastructure business, which owns airport operator Vantage Airport Group. Investcorp secured a deal to make an equity investment in the development of Terminal 6 at New York’s John F. Kennedy International Airport, a project led by Vantage.
"The terminal is going well. They're so far on time and on budget, although we're a few years away from opening," Jayanti said. JFK Terminal 6 will replace the current Terminal 7 and connect international and domestic flights from Terminal 5. The project has airline commitments from JetBlue, the Lufthansa Group (including Swiss and Austrian Airlines), and Aer Lingus.
Investcorp, among the Middle East’s largest alternative asset managers, formed a new entity jointly owned by Investcorp and Corsair as a result of their deal. Investcorp Corsair Infrastructure Partners will include the infrastructure business’ existing funds, investments and team.
Established in 2015, Corsair Infrastructure's $5.1 billion in assets makes up a little more than half of Corsair Capital's $10 billion in totals assets under management. It invests in transportation, logistics and other infrastructure subsectors.
"It made a lot of sense, and it's something we wanted to do for a while," Jayanti said about expanding its infrastructure platform with Investcorp. "Having them as a strategic partner given their footprint in the Middle East and given their ultra-high-net-worth client base, those two elements are strategic for us and for the business."
The aim is to generate returns somewhere in the low teens, he added. "We want our clients to benefit from our due diligence and value creation. We're offering our clients an opportunity to invest in what the market calls value-add infrastructure that applies a more active private equity playbook to infrastructure assets. That obviously runs the range of how we identify targets, diligence them and what we do with the assets afterwards," such as Vantage and Dubai Ports.
"Having a local partner in that part of the world where there’s liquidity gives us access to the client base in the Middle East," he said of Investcorp.
The joint venture with Corsair and Investcorp is part of a larger trend of asset managers buying into smaller specialist firms. Bridgepoint Group last year acquired North American infrastructure investor Energy Capital Partners in a $1.1 billion deal and CVC also acquired Dutch infrastructure firm DIF Partners. On the larger end, BlackRock announced it January it was acquiring Global Infrastructure Partners in a $12.5 billion deal.
Pensions & Investments' latest survey of the 1,000 largest plan sponsors showed that defined benefit plans have upped their allocations to infrastructure over the past decade to $99 billion in 2023 from $9 billion in 2013. That's a 10-year compound annual growth rate of just over 26%.
Transparency
One aspect of Corsair that Jayanti insists upon is transparency.
"Our LPs give us a high grade for being clear," he said. That includes sending timely and topical investor letters, picking up the phone when clients call, having fund partners answer questions and not only investor or public relations.
"This is why culture matters. LPs want the returns, but they want communication and a greater degree of collaboration with their GPs. We work hard to accomplish that for them or with them," he said. "LPs gravitate towards firms that work well with them."
The private equity industry “has changed a lot. When I took over, Corsair was investing in banks and insurers as a minority owner. Now, we’re more of a control investor in less-regulated companies in and around the financial sector, such as smaller, founder-led type of businesses. We turn those new companies into platforms for growth.”
The January acquisition of MJM Holdings, a leading European commercial insurance broker, was one such deal, and the September 2023 sale of Oakbridge Insurance, an independent insurance and risk management agency, following the successful closure of 25 acquisitions, was another.
Prior to spinning off Corsair as an independent business from J.P. Morgan Chase in 2006, Jayanti was a senior member of the investment team of the predecessor Corsair funds and was responsible for managing operations of the Corsair business since 1994.
His first mentor was Nick Paumgarten, a senior banker at what would become Credit Suisse First Boston. "There were two types of specialists: energy and financial services. He co-founded one of the early groups I worked at, the financial services group. He was asked by J.P. Morgan to establish a private equity business in financials. That became Corsair. He got 10% of the LP startup capital. He brought me along as his young person, his bag carrier."
Jayanti remains the largest shareholder in Corsair.
"The partnership is well represented across the business," he said. Other employees are also owners. Corsair now employs roughly 70 people full time in New York and London.
Its portfolio companies range from $150 million to $800 million in enterprise value.
"They operate in areas of industry with structural tailwinds and profitability. We work with a strong, small company where the founder or leader determined they have a massive opportunity to grow three to five times, and they need help. We usually have the largest shareholder position."
Trends in PE
Jayanti said he sees some larger trends at work now in private equity — including a proliferation of secondary offerings among private equity investors.
Investors' eagerness to sell off portfolio holdings "suggests private equity isn’t a 10-year asset class, but a three- to four-year asset class" for many institutional investors, he added.
"In the past, LPs had investments in a variety of hundreds of funds and managers. Now, they don’t have people to manage it. They want to cut the fund number down to 80. They do a portfolio sale of those interests. That represents PE's shorter shelf life."
In 2023, hot topics included interest rates, valuation, capital return and expectations. "Now, investors are asking, 'what impact are higher rates going to have on deploying capital going forward?'"
As for the U.S. election, there "remains conflicting data around whether the Fed should or shouldn't lower rates before the election in a meaningful way. The picture is murky. While deal activity has picked up somewhat, there's still a lot of people on the sidelines. We're seeing some of that reflected in the amount of activity in GP-led secondary space. They want to raise capital to return to LPs and are balancing that with wanting to continue to work with companies where they have not maximized return potential yet."
As for the IPO market, "It remains extremely uncertain for PE sponsor exits," he said.
