Onex, not long ago a single-strategy buyout manager, is broadening its focus, most recently by launching a debut transportation offering led by a former portfolio executive.
Onex Transportation Partners, a private equity strategy, was unveiled in the firm’s first-quarter earnings call. It will emphasize investing in “transportation-related assets used for land, air, marine and industrial applications,” president Bobby Le Blanc said.
The fund is timely in light of growing market uncertainty and volatility spawned in large part by inflationary pressures. Characteristics of its investing, Le Blanc said, will include “hard assets with long lives, contractual cashflows and an element of inflation protection.”
Onex for this reason thinks the fund “will appeal to infrastructure and cash-yield-oriented investors looking to rebalance into the fiscal economy,” he added.
Onex Transportation Partners I is expected to start fundraising in the fall. A target has not been determined, though Le Blanc believes it will roughly correspond with the size range of the firm’s mid-market ONCAP vehicles. ONCAP IV closed in 2016 at $1.1 billion.
Onex, founded in 1984 by CEO Gerry Schwartz, has considerable experience in the transportation industry. Its active portfolio investments include BBAM, a leased aircraft manager acquired in 2012, and WestJet, a low-cost airline carrier acquired in 2019.
Because of this, the fund is “very much aligned with our strategy of building out new businesses that leverage our sector knowledge and add value to our growing asset management business,” Le Blanc said.
In fact, the transportation platform will be run by an ex-BBAM senior vice president. Wes Dick, hired this year as a managing director and head of Onex Transportation Partners, led BBAM’s capital raising and played a role in the creation of Incline Aviation, the company’s aviation PE arm.
Working alongside Dick is managing director Keith Allman, previously with Mitsubishi UFJ Financial Group. He was also recruited this year.
The transportation strategy is the latest to be introduced by Onex as a way to “add fee-generating AUM,” Le Blanc said. Before, the firm’s energies were focused on advancing its private debt and wealth management initiatives.
Today’s Onex Credit is the outgrowth of a credit division started in 2007 to invest in collateralized loan obligations. Onex scaled the operation to reflect CLOs, direct lending, opportunistic and structured credit, and public debt and equity. A seminal event was the 2020 purchase of Falcon Investment Advisors, rebranded as Onex Falcon.
Private credit fundraising is now integral to Onex’s on-going campaigns. Last year, it secured about $2.4 billion, the lion’s share for CLOs. Activity also included an inaugural structured credit opportunities fund, wrapped up this year above its $500 million target.
Onex Credit was until recently led by Jason New, a one-time executive with Blackstone’s GSO Capital Partners. Hired in 2020, he left in January to co-found NovaWulf Digital Management, according to his LinkedIn profile. He has not yet been replaced, sources told Buyouts.
Onex also has a wealth management unit formed with the 2019 acquisition of Gluskin Sheff. Along with providing the firm with a public securities investing complement to PE and private debt strategies, it lends access to high-net-worth investors.
On to Fund VI
The year ahead will see the first close of Onex’s next flagship buyout offering, Onex Partners VI, anticipated “in late Q2 or early Q3,” Le Blanc said. ONCAP V is due to get underway in the fall.
Targets were not disclosed, though both vehicles are likely to have higher goals than their predecessors. Onex Partners V closed in 2017 at $7.15 billion.
In the earnings call, Le Blanc acknowledged factors roiling PE fundraising at present, such as a crowded marketplace. “We remain confident in our own plans,” he said, “and in our ability to grow fee-generating AUM through our PE platforms.”
“I expect it to be a longer process. I expect it to be more difficult than prior fundraises,” he said. “But I expect we will be able to maintain many of our current partners and other new partners, including distributing [Onex Partners VI] through Gluskin and potentially other retail channels, which we’re actively exploring.”
Since inception, Onex has generated a 2.5x gross multiple, it reported, resulting in a 27 percent gross IRR on realized, substantially realized and publicly traded investments.