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Eurazeo targets US pensions after buying into Rhône

Rhône's network of US investors could be useful for the French firm, which is likely to come back to market in 2018.

Eurazeo, the Paris-headquartered listed investment firm, is aiming to tap into US public pension investors by acquiring a stake in private equity manager Rhône Group.

The deal – which is expected to close in H1 2018 – will see Eurazeo secure a 30 percent interest in Rhône Group for $100 million cash and two million newly issued Eurazeo shares, according to a statement. Three Eurazeo representatives will serve on Rhône’s board of managers but the two will continue to operate independently and maintain full discretion over their respective investment decisions.

The move comes as part of a wider strategy to increase Eurazeo’s third-party assets under management, Philippe Audouin, chief financial officer at the firm, told Private Equity International. It currently manages €7 billion of assets, of which approximately €6 billion is held on the balance sheet.

“Here we could have the opportunity to cross-fertilise our network of LPs to develop the third-party money management on both sides,” Audouin said.

“We have announced at the beginning of this year the final close of Eurazeo Capital II, which is almost fully invested now. So it’s not unrealistic to think that we might in the future, maybe next year, start to raise Eurazeo Capital III.”

Eurazeo II – which closed on €500 million in January – comprised 73 percent European commitments, 15 percent North American and 12 percent Asian, according to a statement. New York-based Rhône Group manages over €5 billion in real estate and private equity assets and has attracted commitments from a wide range of US public pensions, including Arizona State Retirement System, Maine Public Employees Retirement System and New York State Teachers’ Retirement System.

“We already have contact with several large US pension funds but we would certainly be very glad to expand this network,” Audouin added.

The deal is not Eurazeo’s first foray into the GP-interest market. Its portfolio also includes private debt firm Capzanine and asset management investor IM Square, which acquires minority stakes in investment firms with between $1 billion and $15 billion of AUM.

Such transactions are becoming increasingly common. There have been at least six other growth or private placement investments into private equity managers from other investment firms or funds this year, according to data from S&P Global Market Intelligence, and 2015 and 2016 each had more than double the total deals in 2014.