Good morning! Today my editor Laura Kreutzer reports on the increasing number of private-equity firms that are backing direct deals through special-purpose vehicles as an alternative to the more difficult task of raising commingled investment funds.

Also, the valuation practices of the private-credit industry may be contributing to the high redemption requests that some fund managers continue to face, the Journal’s Jonathan Weil writes.

We have those stories and more news below. Please, read on…

More private-equity firms are backing direct deals outside of their commingled funds using special-purpose vehicles as fundraising slows and more wealthy families look to invest directly in deals, Laura Kreutzer reports for WSJ Pro. Bankers and limited partners, alike, say they expect to see even more of these transactions going forward, particularly in the lower middle market.

The flood of investors seeking redemptions from semiliquid private-credit funds in recent weeks raises questions around how such funds value their portfolios, Jonathan Weil writes for The Wall Street Journal. Although accounting rules allow fund managers to use official net asset value, or NAV, in valuing their investments, doing so can skew the portfolio’s worth and create additional complexity when the semiliquid funds invest in each other.

Paramount is in talks to secure signed equity commitments of close to $24 billion from three sovereign-wealth funds led by Saudi Arabia to help back its takeover of Warner Bros. Discovery, the Journal reports, citing people familiar with the matter. Saudi Arabia’s Public Investment Fund has agreed to provide roughly $10 billion of the nearly $24 billion to Paramount, run by David Ellison, the son of billionaire Oracle co-founder Larry Ellison.The agreements with investors, including Qatar Investment Authority and Abu Dhabi’s L’imad Holding Co., are likely to be signed as soon as Monday, the people said.

European buyout firm EQT AB is among the potential suitors for U.K. roadside recovery business AA, the Financial Times reported. AA is backed by private-equity firms such as TowerBrook Capital Partners, Warburg Pincus and Stonepeak.

Staple Investments, a lower midmarket investment firm that backs companies led by Christians, has invested in Corporate Travel Services, a Northville, Mich.-based provider of travel, tours and event-management services. Staple was founded by Managing Partner and Co-Chief Executive Tim Reichert and he leads the firm with Managing Partner and Co-CEO John Guinee, a founder and former managing partner of Constitution Capital Partners.

Superstep Capital, a growth investment firm focused on digital services companies, is backing the combination of JumpModel, a provider of industrial, financial and enterprise-resource-planning services, and Gogh Solutions, an industrial and financial services management provider.

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

Private investment firm Owner Resource Group has sold Bill Gosling Outsourcing, a business process outsourcing company, to fellow private-equity investor Frontenac. Austin, Texas-based Owner Resource acquired a majority interest in the Ontario company in 2020.

Southeast Asian investor Creador's Big Caring Group in Malaysia has registered for an initial public offering of shares in Kuala Lumpur, Reuters reported. The pharmacy chain operator plans to sell as much as 25% of its equity in the IPO. Creador has backed the business for over nine years, according to the firm's website.

U.S. venture fundraising began to strengthen in the first quarter after a multiyear decline. Still, the capital flowing back into the asset class is benefiting just a handful of firms, WSJ Pro's Yuliya Chernova writes. Venture funds in the U.S. raised $47.8 billion through March, according to market-data firm PitchBook. That figure points to a significant recovery from last year, when venture funds collected just $66.7 billion for the entire year, the lowest annual sum since 2017, according to PitchBook.

The Iowa Public Employees’ Retirement System has placed two senior executives on administrative leave pending the outcome of two separate investigations of misconduct allegations, according to a pension system spokeswoman, confirming local news reports. Steven Herbert, Chief Benefits Officer at the roughly $46 billion system, and Chief Executive Greg Samorajski are on leave, but the spokeswoman declined to provide details on the nature of the allegations. “These situations do not pose any risk to the IPERS Trust Fund, and do not impact benefit payments to our members,” she said by email. Samorajski was appointed as CEO of the system in 2020 and Herbert joined last year. 

Before the conflict in Iran broke out, the Middle East was a reliable source of another important resource: cash, the Journal reports in an examination of the four wealthiest countries in the region. Gulf leaders and their sovereign-wealth funds have pumped billions of dollars into everything from massive funding rounds by OpenAI, the $55 billion buyout of Electronic Arts and the takeover of Warner Bros. Discovery in the months before the U.S. and Israel attacked Iran.

Bain Capital's David Gross, who was named the Boston firm's sole managing partner earlier this year, said concerns about private credit and investments in software have been somewhat conflated, telling Andy Serwer of sister publication Barron's that "not all software businesses are created equally. Most of them are highly cash generative, stable, and have good technology positions. Not all ones that were funded with private credit are over-leveraged. I think there's a little bit of throwing a baby with the bathwater phenomenon going on." Bain Capital's credit business has in the 10% to 15% range of assets held in software businesses

If the private-credit industry enters a default cycle this year, as Morgan Stanley predicts, it is unlikely to have ripple effects throughout the broader economy, Elias Schisgall reports for Dow Jones Newswires, citing the bank's analysts. They expect private-credit defaults to rise and assets-under-management growth to slow, but say this may not translate to lower credit availability overall.

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Maria Armental; Ted Bunker; Chris Cumming; Luis Garcia; Laura Kreutzer; Isaac Taylor; Chitra Vemuri.