Good day and welcome back. The word from Berlin: Looks like the party’s over. Valuations that went bananas by last winter have plunged earthward as stock markets tank and central banks jack up rates to head off spiraling inflation -- and oh, did we mention there’s a war in Europe courtesy of Moscow? As our Private Equity News colleague Sebastian McCarthy reports from the SuperReturn International conference, mostly what’s left to come is a hangover. And, we might add, a recession.

But deals are still getting done and fundraising continues. Our Preeti Singh reports that those market declines have put some institutional investors in a bind by skewing asset values in ways that could leave them shut out of new private-equity funds.

Preeti also has a scoop about former Alaska Permanent Fund executive Steve Moseley joining Wafra to lead a new co-investing strategy. And finally, our Chris Cumming reports that the biggest public pension in Pennsylvania is committing $350 million to private equity, extending its bets on the asset class.

We have these stories and more for you below, so please read on ...

Pensions and endowments that find themselves overexposed to private equity after two years of near-record fundraising are looking for ways to lighten the load so they can continue investing, WSJ Pro Private Equity’s Preeti Singh reports. Declines in public stocks and bonds and slower cash distributions from private-equity funds have pushed or threatened to push the value of more investors’ portfolios to the upper limits of what their allocation policies allow them to invest in private equity. The resulting overexposure is forcing some to make tough choices if they want to remain active investors at a time when many higher-performing private-equity managers are pitching new funds.

Steve Moseley, who stepped down in May as head of alternatives at the Alaska Permanent Fund Corp., is joining investment adviser Wafra Inc. as a managing director to lead a new co-investment strategy. Wafra’s new Covalent strategy will pursue a broader set of co-investment opportunities in the larger ecosystem of asset owners and managers than its Capital Constellation initiative, according to Daniel Adamson, a Wafra senior managing director. Mr. Moseley designed and implemented the $78.95 billion Alaska sovereign-wealth fund’s approach to investing in commingled funds, as well as co-investing alongside fund managers and making direct investments.

Pennsylvania’s largest public pension fund plans to commit as much as $350 million to boost its investments in private infrastructure and growth equity, Chris Cumming reports for WSJ Pro Private Equity. The board of the roughly $75 billion Pennsylvania Public School Employees’ Retirement System on Friday approved commitments of up to $250 million to a separately managed account with GCM Grosvenor Inc. in Chicago and up to $100 million to a new fund managed by Greenoaks Capital Partners in San Francisco.

Join us on July 19 for a members-only virtual event to discuss portfolio management in turbulent markets with industry specialists and journalists from WSJ Pro Private Equity. The event will feature two panel discussions–one on how limited partners are adapting to current market conditions, the other looking at trends in the secondaries market. You can register here.

Blackstone Inc.’s real estate investment trust expects to close its $5.8 billion acquisition of Preferred Apartment Communities Inc. in Atlanta on Thursday after nearly all the target REIT’s shareholders voted to accept the $25 per share deal, according to a news release. Blackstone and Preferred Apartments made the deal in February, saying then that it included 44 locations with about 12,000 units in all, mostly in Sun Belt cities such as Orlando, Fla., and Charlotte, N.C.

Private investment firm JAB Holding Co. in Luxembourg  is acquiring the Crum & Forster Pet Insurance Group and Pethealth Inc. from Fairfax Financial Holdings Ltd. in Toronto for $1.15 billion in cash and $250 million in notes, while Fairfax is investing $200 million in JAB’s latest consumer-focused fund, JCP V, according to a news release. Once the deal closes, JAB’s pet insurance and health services operations will generate “well over $1.2 billion” by next year, including through insuring over 2.1 million pets. JAB earlier this month ran up against U.S. antitrust regulators over its acquisition of veterinary practices in California and Texas, agreeing to divest six clinics as it acquires SAGE Veterinary Partners LLC for about $1.1 billion to settle Federal Trade Commission concerns about effects of the deal on competition.

An investor group that includes Astorg Asset Management and Epiris is in talks to acquire business publisher Euromoney Institutional Investor PLC for £1.6 billion, equivalent to about $1.96 billion, Ian Walker reports for Dow Jones Newswires in London. The £14.61 per share proposal represents ​​a 34% premium to the company's closing price of £10.94 a share on Friday. The group has until July 18 to either make a formal offer or walk away under U.K. rules.

Swiss Life Asset Management AG and EDF Invest led a recapitalization of DataBank Holdings Ltd., acquiring a 27% interest in the company from DigitalBridge Group Inc. for $1.2 billion, according to a news release. DigitalBridge said the deal would reduce its DataBank stake to 15.5% and result in cash proceeds of about $230 million, in a securities filing. The valuation used for the deal represents 1.9 times the company’s investment in DataBank, according to the filing. The recapitalization is expected to bring in more new investors before it is completed later this year. DigitalBridge led the acquisition of Dallas-based DataBank in 2016, when the business consisted of six data centers serving three U.S. metro markets. The company now operates in 27 markets and has more than 65 data center locations.

Patrizia AG’s infrastructure arm is acquiring a majority interest in Biomet Spa for about €75 million, or roughly $78.8 million, from founder and Chief Executive Antonio Barani and entrepreneur Walter Lagorio, according to a news release. Biomet is developing two plants in Italy for converting biological waste into methane and a liquefied natural gas producer.

Mutares SE has acquired the Heat Transfer Technology operations of Siemens Energy BV, according to a news release. The Netherlands-based business specializes in technology to capture and use waste heat and steam from gas-fired power plants and has around 270 employees, mainly in its home country and Germany.

Astorg Asset Management has recapitalized contract research organization Avania BV, acquiring a majority stake in the business while existing investor Kester Capital remains a minority backer, according to the London-based firm’s website. Avania provides contract medical research in areas such as orthopedics, cardiovascular, dermatology and aesthetics. Kester acquired a majority interest in the Netherlands-based company in 2016.

A plan to combine the two of the biggest hospital groups in Utah, owned by HCA Healthcare Inc. and Steward Health Care System LLC, was abandoned two weeks after the Federal Trade Commission took steps to block the transaction in court. The agency’s competition chief, Holly Vedova, said the combination was a nonstarter from the get-go and that its demise “should be a lesson learned to hospital systems all over the country” that the FTC will act to block anticompetitive deals “to protect healthcare consumers who are faced with unlawful hospital consolidation.” The agency has recently turned its attention to private equity activity in the sector as well.

Tax-advantaged investment specialist Monarch Private Capital has acquired a wind-energy project in West Texas with the capacity to generate 450 megawatts of power, according to a news release. The projects consist of nearly 200 wind turbines.

All Seas Capital Partners in London is backing medical center operator SoMeD Santé with a growth investment, according to a news release. The French company operates in nine locations and offers various medical and dental services. All Seas, which was recently set up by former KKR & Co. executives Marc Ciancimino and Cristobal Cuart, is investing through its first flagship fund.

Our add-on deal interactive tool allows you to sort and analyze volumes of add-on deal data compiled by WSJ Pro. View more.

Charterhouse Capital Partners has agreed to sell environment-focused consulting business SLR Consulting Ltd. to Ares Management Corp., according to an emailed news release. Charterhouse said the English company’s adjusted pre-tax earnings doubled over the four years it has owned SLR, which now has more than 2,300 employees spread across over 100 offices. Ares is acquiring the business through its private-equity strategy.

EnCap Investments is backing Double Eagle Energy Holdings IV LLC and Tumbleweed Royalty IV LLC, formed by a group led by Cody Campbell and John Sellers, who are the co-chief executives of the Double Eagle fund, according to a news release. Minority investors in the funds include Apollo Global Management Inc., through its Natural Resources strategy, and Magnetar Capital. The new vehicles will split $1.7 billion of initial capital committed by EnCap, Apollo and Magnetar funds, as well as the Double Eagle management team.

Investment manager Downing LLP in London has named Dr. Nigel Pitchford as head of healthcare ventures, a new role at the firm, according to an emailed news release. The firm said the hiring is part of a push to build a specialist healthcare platform and expand its retail funds alongside dedicated institutional offering. A veteran healthcare executive, he was most recently chief executive of online mental health company IESO Digital Health Ltd.

Pasaca Capital Inc. founder and Chairman Dr. Charles Huang has donated $7 million to San Francisco's Chinese Hospital through his Charles Huang Foundation, according to a news release. The hospital plans to refurbish an outpatient facility.

Private credit-backed Latam Airlines Group SA got a bankruptcy court judge to approve a chapter 11 exit plan that puts $5.4 billion of fresh capital into the Chilean business, moving it closer to ending its pandemic-driven restructuring after two years, Akiko Matsuda reports for WSJ Pro Bankruptcy. Latam, the largest airline in Latin America, is handing control to major unsecured creditors including Sixth Street Partners, Strategic Value Partners and Sculptor Capital Management, which agreed to backstop $3.67 billion of a planned capital raise. Current shareholders of Latam, including Delta Air Lines Inc. and Qatar Airways, will guarantee another $1.77 billion in common stock and convertible notes, while retaining minority stakes in the business. Sixth Street, SVP and other major creditors will collect $734 million in cash fees for their pledge to backstop the capital raise -- meaning to purchase any securities that might otherwise go unsold.

Ernst & Young LLP’s plan to split its audit and consulting businesses would give thousands of its partners multimillion-dollar payouts and relies on optimistic assumptions for growth to justify the deal, Jean Eaglesham and Ken Brown report for The Wall Street Journal, citing internal company documents and people familiar with the matter. The plan would split up the firm’s accountants who audit companies like Amazon.com Inc. from its faster-growing consulting business, which advises clients on tax issues, deals and technology, among other things. The breakup of the 312,000-person firm could happen as soon as late next year.

In an emerging era of high inflation and rising interest rates, Jonathan Gray, Blackstone Inc.’s president and chief operating officer, said markets such as real estate and infrastructure are becoming more attractive, Sebastian McCarthy reports for sister publication Private Equity News in London, citing Mr. Gray’s remarks during an industry gathering in Berlin last week. “Hard assets with less exposure to input costs and favorable short duration income: that’s what you need in this kind of environment,” Mr. Gray said. He cited Australia’s Crown Resorts Ltd. casino operator and a U.S. student housing company as examples of such businesses that have recently been added to Blackstone’s portfolio.

KKR & Co. Partner Henry McVey calls for a "complete rethinking of asset allocation" and points to significant opportunities behind "mega themes" like energy transition and security and ranging from defense and critical infrastructure to healthcare and consumer data, WJ Pro Private Equity’s Maria Armental reports for Dow Jones Newswires, citing Mr. McVey's Mid-Year Update. The need to build more resilient energy transportation, from pipelines to power grids and supply chains could create a capital-spending supercycle, according to Mr. McVey, the chief investment officer of New York firm’s balance sheet and its head of global macro, balance sheet and risk. From a cash deployment standpoint, Mr. McVey said, "we remain in a walk, not run stance,” pending actions by the Federal Reserve to rein in inflation.

The U.S. economy is very likely on a path to shrink this year and next, Michael S. Derby reports for WSJ Pro Central Banking, citing a Federal Reserve Bank of New York report out Friday. According to how the New York Fed models the economy’s path, the report said that “the chances of a hard landing…as occurred during the 1990 recession are about 80%,” while the probability of a “soft landing,” in which gross domestic product essentially remains positive over the next 10 quarters, is 10%. The report said the New York Fed’s model predicts a 0.6% contraction for this year and a 0.5% downturn in 2023, with inflation remaining very elevated this year before waning next year and later.

Most top executives see a recession looming or say it is already here, according to a new global survey that reflects a rapid deterioration of the economic outlook among business leaders, Alex Harring and Chip Cutter report for The Wall Street Journal. More than 60% of CEOs expect a recession in their geographic region in the next 12 to 18 months, according to the poll of 750 top executives by the Conference Board, a business research firm. An additional 15% think the region of the world where their company operates is already in a recession.

Tax incentives and other government support for clean energy in the U.S. is key to accelerating investment in the area and drawing in new players, reports Phred Dvorak for Dow Jones Newswires, citing Tyler Reeder, managing partner at private-equity firm Energy Capital Partners Management. The firm invests in energy infrastructure and has about $22 billion in assets under management. Bills to expand or extend many incentives stalled in December, but Democrats hope to pass a slimmed down package in the next several weeks.

Cryptocurrency-focused hedge fund Three Arrows Capital Ltd. has hired legal and financial advisers to help work out a solution for its investors and lenders, after suffering heavy losses from a broad market selloff in digital assets, Serena Ng reports for The Wall Street Journal, citing the firm's founders. "We have always been believers in crypto and we still are," Kyle Davies, a Three Arrows co-founder, said in an interview. "We are committed to working things out and finding an equitable solution." The nearly decade-old hedge fund, which was started by former schoolmates and Wall Street currency traders Su Zhu and Mr. Davies, had roughly $3 billion in assets under management as of April.

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Maria Armental; Ted Bunker; Chris Cumming; Luis Garcia; Laura Kreutzer; Preeti Singh; Chitra Vemuri.

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