In a move which will further diversify its revenue streams, The Carlyle Group has partnered with the management team of Alpinvest to acquire the €32 billion Dutch fund of funds giant from its two owners.
The sale by Dutch pensions APG, which manages assets of €265 billion, and PGGM, which manages €100 billion, concludes a process that reportedly began in 2008. The two pension fund asset managers are selling AlpInvest so they can ramp up their own private equity fund investment programmes.
AlpInvest generated €60.3 million of revenue in 2009, a drop from the €92.2 million generated in 2008, according to the group’s 2009 annual review. Financial details of the sale were not disclosed.
APG and PGGM said they “will continue to be the anchor clients of AlpInvest”, committing a further €10 billion to the fund of funds group over the next four years.
A deal like this raises potential conflicts of interest, as one of the world’s largest GPs will own one of Europe’s most influential limited partners, which has commitments to many funds run by Carlyle’s competitors.
“AlpInvest will retain complete discretion over all investment decisions, which will be made by an investment committee consisting solely of AlpInvest investment professionals,” a joint statement from AlpInvest, Carlyle, APG and PGGM said. “AlpInvest will also maintain an information firewall with Carlyle to provide safeguards for general partner, fund or deal-specific information.”
GPs whom AlpInvest have backed in the past said they did not expect the deal to alter their relationship with the LP. One mid-market GP commented that it would have “no bearing whatsoever”, while another pointed to the successful model currently operated by AXA Private Equity, which raises both funds of funds and direct investment funds.
AlpInvest will retain complete discretion over all investment decisions
AlpInvest’s board will be evenly split between the group and Carlyle executives.
The success of Carlyle’s bid for the fund of funds manager was helped by its agreement to sign a strategic partnership with the current owners on the subject of environmental, social and governance (ESG) policies, said Harmen Geers, a spokesman for APG.
Martin van Rijn, PGGM’s chief executive officer, said: “The cooperation on the integration of [ESG] issues into private equity investments is very important to PGGM. We have confidence in this new relationship.”
The AlpInvest deal will diversify Carlyle’s revenues as it reportedly prepares to follow in the footsteps of its rivals Kohlberg Kravis Roberts and The Blackstone Group by publicly listing.
Carlyle, which manages more than $97 billion across various alternative asset classes, is a partner with compatible goals to AlpInvest, said the group’s chief executive officer, Volkert Doeksen. “Importantly, Carlyle’s global network and respected brand will help AlpInvest broaden our investor base and product scope”, he added.
Credit Suisse acted as financial advisor to APG and Catalyst Advisors acted as financial advisor to PGGM.
Toby Mitchenall contributed to this report