Edmond de Rothschild raises €300m for co-investing

The private equity arm of Paris-based asset manager Edmond de Rothschild (EDR) has held a final close on the latest fund in its Edmond de Rothschild Equity Strategies (ERES) franchise on its €300 million hard-cap.

ERES III, which is larger than its €217 million 2011-vintage predecessor, should make between 15 to 20 investments of between €10 million and €45 million alongside majority partners in mid-cap companies with an enterprise value of between €100 million and €2 billion.

ERES III can get involved at several stages of the investment process. It can work with the partner investor pre-exclusivity, participating in the due diligence and ultimately committing to the overall total equity, as well as coming in to provide capex during the life of the investment.

ERES has also developed an offering it calls the “equity syndication backstop”, where the vehicle can fund up to half of the total amount of a transaction as a stop-gap before the lead investor then syndicates 50 percent of ERES’ investment to its own LPs.

Jean-Fran?ois Félix, head of the ERES team, told Private Equity International that although fund LPs are increasingly searching for co-investment opportunities, there is still an important role the ERES fund series can play. Investing from a fund means ERES can execute more quickly, and it can also offer its partners and portfolio companies access to the Edmond de Rothschild Group’s wider network.

“Yes, LPs are clamouring for co-investments, but the issue is that apart from the top and very sophisticated LPs, most of them are not geared toward doing co-investment. They don’t have the size to justify having a co-investment team,” Félix said.

“It becomes a second line of business for the guys that are doing primary fund commitments, but it’s always at the back of the pile, and they’re not really geared to go with the flow and the momentum of the transaction.”

The fund series invests globally. So far, the geographic split of investments has been split evenly between France, Europe excluding France, US and Canada, and emerging markets.

ERES III, which is understood to be charging a management fee of just below 2 percent and carried interest of 20 percent, is targeting a return of two times invested capital and an internal rate of return of 15 to 20 percent.

In the past, ERES series partners have included other funds in the Edmond de Rothschild Group, Amethis Finance, an Edmond de Rothschild Group investor focused on Africa, and several funds managed by the Carlyle Group.

“We see ourselves as an enabler for GPs in a very competitive world where any competitive edge is good to have,” Félix said. “I think that’s where we want to be bringing the Rothschild name, network, resources to bear with our partners.”