Apax Partners chief executive Martin Halusa reassured limited partners that the future of the firm’s latest fund, Apax Europe VII, is sound, via a five minute online video. The video clip represents the first time the firm has communicated with its LPs in this manner, said a spokesman for the firm.
The €11.2 billion fund closed in 2007 and is around 40 percent invested to date. The fund is the largest European fund raised to date. Among its portfolio companies are middle market insurance broker Hub International and specialist media publisher Trader Media Group.
Halusa said his decision to speak directly to LPs ahead of regular earnings reports was motivated by “increasingly alarming and alarmist commentary” about the fortunes of the private equity sector.
The video was produced by online financial broadcaster Cantos. Within the last year, several other private equity firms have worked with Cantos to produce similar online videos for the first time, Cantos said.
In the video, Halusa said that three-quarters of the fund’s investments are on or above plan, while “the remainder are at risk of underperforming their original investment thesis”.
“We are spending a considerable amount of time focusing on these companies,” he said.
Apax expects to be able to contain the impact of underperforming investments on the overall portfolio, Halusa said.
The fund has an average leverage ratio of 5x, which Halusa said is relatively “conservative”. The fund’s first significant refinancing is not due until 2012.
Halusa also warned LPs to expect significant write-downs at year-end, but said the write-downs would be the result of mark-to-market accounting standards, reflecting neither the intrinsic value of the portfolio nor the value the firm expects to ultimately realise.
Despite the turbulent markets, Halusa said that nonetheless he believes the fund “could end up being one of the best performing funds in our history”.