AXA, LGT buy €620m portfolio from German bank

German state-owned banks have been selling off their private equity holdings because of bailouts and increasing regulations, contributing to record activity on the secondary market.

AXA Private Equity and LGT Capital Partners have teamed up to buy a €620 million portfolio of private equity holdings from German bank HSH Nordbank, highlighting the keenness of some German financial institutions to sell off illiquid assets.

AXA bought a majority stake in the overall portfolio, which comprises 47 limited partner interests in European private equity funds. AXA PE’s purchase consists of 18 LP holdings focused on European mid and large-cap buyout funds, representing €478 million in original commitments.

LGT is buying a €369 million portfolio consisting of the remaining 29 small and mid-market European buyout funds, a source with knowledge of the deal told Private Equity International.

For AXA, the deal represents the firm’s third secondary deal in recent months, following its deal for a $1.7 billion portfolio of assets from Citigroup and a $740 million portfolio from Barclays. AXA PE has spent more than $6 billion this year on secondary transactions.

Some German landesbanken such as WestLB and Landesbank Baden-Wurttemberg (LBBW), have been selling off private equity holdings, having been bailed out by the state after sustaining huge losses in the downturn of 2008.

WestLB, which transferred its problem assets into a “bad bank”, recently hired Cogent Partners to auction its private equity holdings.

LBBW was “making good progress in reducing its investment portfolio to meet the requirements of the EU restructuring plan”, a spokesperson for the bank said in an email.

The landesbanken, or state-owned banks that represent entire regions of Germany, started building exposure to private equity and other illiquid investments in the 1990s. Along with agreements that came with bailouts, regulations like Basel III and Solvency II have forced banks in Europe to divest their private equity holdings.

Banks in the US have been selling large portfolios as well, contributing to what will probably be the most active year ever on the private equity secondary market, several sources have told Private Equity International.