Inside Allianz’s private equity ambitions

The firm surpassed its €500m fundraising target for its latest PE fund, which will invest in GPs and deals alongside European corporate pensions, insurers and family offices.

Allianz Global Investors, the 14th largest investor in private equity according to the GI 100 ranking, held a first close last week for its debut third-party vehicle.

The firm – which had previously raised pools of capital for alternatives mainly from its parent company, German insurer Allianz – raised €520 million on a €500 million target for Allianz Private Equity Fund.

The concept behind APEF is what the firm calls ‘Invest with Allianz’, which aims to open up the Allianz investment programme to external institutional clients, Michael Lindauer, co-CIO of private equity at Allianz Capital Partners – Allianz GI’s alternatives arm – told Private Equity International.

ACP will invest alongside all opportunities pursued by the APEF on a pro-rata basis and will constitute at least 50 percent of the overall combined capital committed to such investments.

Michael Lindauer, Allianz
Lindauer: GPs coming back to market sooner has triggered a new approach to due diligence

APEF, which began capital raising in February, gathered commitments mainly from European corporate pension funds, insurance companies and family offices.

According to Lindauer, the fund’s strategy will not differ from how the firm has deployed capital in the last 25 years: mid-market is a focus and capital allocation will be more or less evenly distributed across Europe, North America and Asia. Typical commitment sizes range from €40 million to €200 million.

“We came from being the principal investor of Allianz, so it was important for us to go out, raise capital and not change the strategy,” Lindauer said. “That’s about 30 to 40 investments per year across primaries, co-investments and select secondaries opportunities and includes venture capital in Asia – the only region we do venture – up to mid-to-large buyouts.”

The firm aims to achieve a return of between 10 and 13 percent for the APEF, he added. A final close is expected next year.

Trill Impact and Scout Ventures are among the GPs the firm has backed previously, according to PEI data.

ACP also invests opportunistically in secondaries. Pricing is a key consideration, which means the firm has to be selective and back secondaries transactions around its portfolio, Lindauer said. Co-investments, meanwhile, make up 20 percent of the PE portfolio.

ACP managed €44.2 billion of assets as of June, of which nearly half is in PE and the remainder in infrastructure and renewables.

Fundraising on a roll in 2021

With fundraising at record levels – PE firms gathered $535 billion from January to September, according to PEI’s third-quarter fundraising report – how does Allianz’s alts unit think about PE’s fundraising frenzy and its implications on manager selection?

“We’re working with what we call a shadow portfolio, where we basically sketch out over the next four years – given what we know at a given point in time – which GPs we like and we try to be proactive as an early closer or first closer to make sure we also deliver certainty to the GPs with regard to their fundraising,” Lindauer said.

He declined to add further details on the shadow portfolio and said that GPs coming back to market much sooner had triggered a change in how the firm approaches due diligence.

“We’ve been doing this now for 25 years and in the earlier days, we very much relied on historic, realised records. And as an LP you had mostly made the assumption that past performance will also mostly be the same going forward,” he said. “Now our focus in due diligence is to answer the question: is the GP set up well for what we see are the market challenges or opportunities?”

Lindauer added that the focus is much more on the latest fund portfolio and the operational performance of the portfolio companies.

“Frankly for us, it’s about answering the question: would we also have liked to buy those companies? If the answer is yes for most of the time, it speaks a lot about providing capital to the GP going forward.”