The firm, which in December raised DKr22 billion ($3.6 billion; €3 billion) for its fourth fund of funds vehicle, wants to add third-party capital to its $10 billion assets under management, Anette Eberhard, managing partner at IIP told Private Equity international.
“We are in some discussions with external parties for commitments during the first quarter of this year. We expect to grow our investor base to include other smaller Danish pension funds that have not yet set up a large PE team, as well as family offices,” said Eberhard.
She added that IIP is “not planning to be a basic fund of funds manager, but a separately managed accounts firm”, and hopes to attract a handful of investors with separate accounts requirements.
The SMAs would be in line with IIP’s investment strategy of investing in lower mid to mid-market PE firms, Eberhard said.
Eberhard declined to disclose how much IIP intends to raise from external investors.
Originally established as PKA AIP in 2012, the PE unit was rebranded as IIP Denmark in early 2018 following the split of its PE and infrastructure businesses at the end of 2017.
PKA manages $45 billion of assets from four Danish pensions funds with approximately 320,000 members including nurses, medical secretaries, social pedagogues and pharmacologists.
IIP Denmark has grown its team in the past year, with senior appointments as well as the addition of a valuations specialist, Eberhard noted. The firm is also expecting further hires this year for portfolio management, she said.
Fund IV, which is already 20 percent deployed, will back approximately 30 lower mid to mid-market firms, with commitment sizes between $50 million and $150 million, and $15 million to $60 million for co-investments, according to Eberhard.
“We’re focused on buyouts and primarily first institutional investors in platform investments. What’s important to us is they have an operational approach to value creation,” Eberhard said.
The firm typically does not invest in funds larger than $3 billion in order to keep its focus on smaller and medium-sized companies, she noted. The majority of the portfolio is in the US and Europe, with a few commitments in Japan.
The firm is also deploying PKA Venture I, a DKr2 billion vehicle that backs early-stage managers focused technology and life sciences investments, according to its website.
Alongside the venture and buyout programmes, IIP has also been tasked by PKA to invest in impact fund managers this year.
“Many of these managers align their strategy with the United Nations Sustainable Development Goals, which is also IIP’s focus,” said Eberhard. “It’s a project we are currently running in order to find out, is it possible to balance financial returns as well as positive social and environmental impact?”
Manager selection during a pandemic
Similar to last year, the story of the private equity fundraising environment this year is existing relationships, noted Eberhard.
During the past eight to nine months, IIP had only focused on re-ups and a “few new managers” that they have met physically prior to the coronavirus pandemic.
“Our sourcing model is pretty prudent. We tend to meet managers over a couple of years before we give them our first commitment. We know the firm not only in terms of numbers and performance, but also investment strategy and culture.”
Eberhard noted that manager selection will be challenging as “the sources are running out in a way, when you have not been able to see a manager for a year or so”.