ATP closes fifth FoF on €800m

The private equity arm of ATP will receive 5% carry if the 8% hurdle rate is achieved.

Copenhagen-based ATP Private Equity Partners, the private equity arm of Danish pension fund ATP, has closed its fifth fund of funds on €800 million.

ATP PEP V, which will start investing immediately, has the same strategy as the ATP PEP funds I-IV, backing GPs in Europe and the US operating in the buyout, venture capital and distressed space. Like ATP PEP’s prior fund of funds, the capital for Fund V was solely provided by ATP.

ATP PEP is part of ATP, a public pension fund. It is therefore prohibited by law to compete with the private sector. “If we wanted to do [raise third party capital], we would have to spin-out ATP PEP from ATP,” managing partner Torben Vangstrup told Private Equity International. “We don’t want to do that because we are happy with the current set up. We don’t have to spend a lot of time on marketing and fundraising and can just focus on investing,” he said.

ATP PEP committed DK 2 million (€268,000; $369,000) to the fund.

“We haven’t received any carry yet from the [prior] funds, so this is a sufficient amount to show we have skin in the game,” Vangstrup said.

Fund V is structured like a traditional fund of funds but does not charge a management fee. Terms are very similar to prior ATP PEP funds, although there has been an increase in the carried interest percentage, Vangstrup said.

“In the current fund, if we have delivered the hurdle rate of 8 percent, then we will receive 5 percent carried interest on the fund. Because ATP is a public pension fund there’s a cap on the total carry amount and we won’t be able to have the same upside as the general industry,” Vangstrup said. “In Fund IV we received 2.6 percent after we had delivered the 8 percent hurdle rate.”

ATP PEP V will typically invest around €40 million in European general partners and $50 million for US-based firms. “This is our sweet spot, but this can be less,” Vangstrup said. “When we invest in smaller funds, we write smaller ticket sizes.”

The firm will aim to deploy Fund V in approximately two years, depending on the deal flow and the quality of the deal flow. “There’s no pressure from ATP on how much money we should deploy each year,” Vangstrup said.

The vehicle will also have an increasing focus on co-investments, a strategy aimed at enhancing returns. The firm has completed more than 25 co-investments since 2000. These investments have returned more than 2.5x, according to Vangstrup.

Last week, ATP invested in Nordic payment provider Nets alongside Advent International and Bain Capital in a €2.3 billion transaction.