Limited partners are shifting their focus towards continental Europe after the Brexit referendum, according to Idinvest Partners‘s global head of investor relations.
The firm – which is raising three private equity funds, a direct lending vehicle and an asset finance fund – is expanding its institutional LP base internationally amid plans to reach up to €20 billion of assets under management in the next five years, Charles Daulon du Laurens told Private Equity International. Brexit is “positively impacting” European fundraising efforts as LPs voice concerns over uncertainty.
“Asian and North American LPs used to view the UK as a safe harbour, while some European markets, such as France, needed structural reform,” du Laurens said.
“Today most are sending signals to us regarding a shift in asset allocation from the UK to continental Europe. The sentiment is explicitly shared by LPs the further away you get from Europe.”
UK mid-market investor Lyceum Capital pulled its fundraising in January and switched to a deal-by-deal basis. It cited, among other factors, a number of international LPs taking a more cautious approach to the UK in the aftermath of the Brexit vote.
Idinvest has partial exposure to the UK – assets in the region accounted for roughly 15 percent of its €155 million 2013-vintage Idinvest Digital Fund II. It anticipates a similar weighting to the UK in Fund III, for which it is seeking up to €350 million, du Laurens said.
The firm expects final closes on its Smart Cities venture capital fund on close to its €250 million target and Idinvest Growth Fund II on its €400 million target before the third quarter of this year, he added.
Idinvest will hire a German-speaking member for its investor relations team this year as part of the drive to internationalise its LP base. It is seeking commitments from investors in countries including the Netherlands and Denmark, as well as those from Canada, Singapore, South Korea and China.
“The challenge of raising internationally is dealing with the complexity and diversity of [LPs’] requirements,” du Laurens said. “The world is highly regulated after the global financial crisis and protections are higher. US venture capital firms can raise so much at home but for [European GPs looking to raise in Europe] you need to consider different legal, regulatory and tax frameworks.”